UGRO - Earnings call transcript Q4 2023

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Operator

Greetings. Welcome to the Urban-Gro Inc. Fourth Quarter and Full Year 2023 Results Conference Call. [Operator Instructions].At this time, I'd like to turn the conference call over to Christian Monson, Urban-Gro's Executive Vice President and General Counsel. Sir, please go ahead.

Christian Monson

you us. thank and afternoon, for joining Good Today's and Akright, Chief be led Chief Nattrass, Chairman by Brad Executive Officer. call will Financial Officer; and Dick I'd including adjusted made and backlog. that include our discussion EBITDA like call a metrics, this will remarks non-GAAP of to remind during listeners These not as be a financial for Urban-Gro's items prepared in should results accordance utilized substitute with GAAP. and release filed our EBITDA be the are our at Securities press adjusted with can net XX-K available ir.urban-gro.com. Form to and Commission loss GAAP our accessed Reconciliations Investor of of in and Relations Exchange the our in from section website On projections. may state we this intentions, call, beliefs, future expectations or management's forward-looking are and uncertainties. and These involve statements risks

securities Actual made Urban-Gro's on call are laws to results statements are federal this pursuant current materially. based could on safe harbor differ expectations. the Forward-looking and provisions the of

As any you on place forward-looking undue statements. a reliance should result, not

reports forward-looking company's Securities are Commission's from the encourage Some on discussed in of carefully. differ to section available the materially these review periodic files and Securities We factors the you results and website. that statements the do These of documents are actual Investors Exchange documents Commission. cause Urban-Gro with such website in could Exchange the to and the

ir.urban-gro.com. Brad. release over that, copy the call may is replay be website, I a Investor our the and found will turn to Relations our Lastly, With earnings for of again press which on webcast now a today's call section of

Bradley Nattrass

confluence performance. across were quarters Thank and fourth top we resulted in to both line the quarter, first in projects disappointing XXXX, met bottom us with a delays you, you improvements of Christian, sequential good multiple delivering today. and afternoon, everyone, in the X After joining thank which of and the for the

that course XXXX were we All expect the currently frustrated beginning over quarter, the first delayed quarter. be are in lost. contracts of circumstances, delayed of and these the we majority revenues none will the of recognized first Although active fortunately, the these are by in

is Our model working.

which SG&A is further efforts positions expenses broaden Our is XXXX to Urban-Gro, for our that considered, to All are strategy where and step-up our diversification evolution will that made XXXX. expect as adjusted near-term in continuing goal and significant a deliver priority. be visible across of for have positive industries, to align XXXX successful a we optimize in XXXX, expanding multiple confident well us backlog a our prove presence consistently EBITDA, year was our for to we we top year company. the identified the

value headwinds our decreased strategy, continued growth ongoing remains the our sector, and representing from or in serve demonstrate to finished million million $XX X%. this some revenues our approximately The sector CEA. sustained X-year or this. team or compression been market, within CEA material the was $XX continued of $XX provide which XX% million, our from with from million, margin the we average revenues commercial on and Further, while XXXX, are advantageous revenues to within cannabis markets of Although the that areas significant our That of $XX the million regulatory of to have million and we XX% as our But or growth XX% this, execute million a we XX%, that are diversification faced XX and of Of equipment there low the $XX that overcome. we year we therefore, equipment which profit moreover, margins XX%. numbers XX%. our This CEA of trends represents resulting a equipment by margin year-over-year to a a from million $XX large by At our $XX XX% just revenues softness decrease XXXX enter serve and financial in multiyear with commercial, decreased or cannabis are from These sector this diversification. a revenues, represents. prolonged the reversal experienced increased we highlight from given as most XXXX, XXXX. to a of offset revenue headwind catalysts decrease is category that from reignite lift an material performance, or other to with replacing changes future business our of XXXX In done our performance. and gross has our being could hurdle said, financial

expenses persistent $X all As SG&A headwinds realize in sector, company the of a an and we the which size more XXXX. reduced of performance across align levels the these we on the than million have current CEA result to basis, expect by of our optimized with annualized to

sector experts team project company engineers, that an as diversification combination growth of multiple have team's focus of continues in-house environment. has construction include serving to designers, our a on clients CEA architects, on a others, managers, us integrated solutions in including in focused interior turbulent horticulturists and our We differentiates to this and and A deliver sectors, commercial. expertise, managers,

looking Now in we at operate. markets in trends which the

investments X demand regards their CEA markets in to the European made entity as continues years, the strategic in over suppressed we our First, well. have in the last

costs we near-term As a workforce result, expenses general and to the demand downsized better our reduced with have align levels.

the we open increasing in anticipate sectors the early continues that that to and and continuing the European growth. market, cannabis most services will to strong our for of Germany, notably provide. in to legalization demand market stages In continue we organic adult-use commercial domestic the legislation the forward, business with there Looking generate up, is be

qualified clients pipeline demonstrated with growing we backlog. our In projects and by as addition to signed have which new executing, contracts both existing of upon a we're

capital the other to year, sector ongoing development CEA focus, by business due our individuals to challenges. in pace continue our we of vertical we to and farming a out our focus slower albeit in commercial intend sector, experienced anticipated adding innovative forward the building In Looking sector roster initiatives. expand at continue to than integrating

we're professional related build design clients all perfect a engage for fulfilling interface is new we of which of continuing that Urban-Gro variety currently with needs. a almost While the for urban utilizes farming for business vertical to in fit services, our

our within anticipated As significant active positive couple market cultivation change changes. remained and potential years, for current solutions it catalysts that business of There the around in on for awareness design believe sector, a result regulatory in business sector. are dispensaries design as As momentum for [ services, progress been also interior we which to than a and sentiment it to cannabis well both segment, build both and more by has the pertains is positive combined we've in fueled and outlook engineering in our heightened few a individually as delivering architecture, facilities. this relates and could it ] our cannabis

of XXXE Schedule tax operators cannabis We with X the federal to facilities ] growth, the this significant building provide to ones. capital refreshing new burden. resulting increases of CapEx operators and on potential would believe level. including will X out related capital First, removal rescheduling [ from working incremental future significant from The existing use the fund

efficient the states. class state banking on capital. successfully discussed level, And larger in adult-use vote change to the and potentially Florida, again, would the would level, for and continues to at have We more but not allow lift sustained moreover, Second, most on a believe profound progress recreational to be continue made in in to operators. state's third, capital safer the successful the only a businesses of include a and federal allows multiple access while exchanges but bill impactful plant-touching provide that legalization markets the state be passing impact be to prospects sales on the the

and positive associated revenues over XXXX, Now consolidated turning to EBITDA. $XX outlook to XX% million, cadence. generate to XXXX a and expect We year greater adjusted our than be we full anticipate increase

point heavily EBITDA reduced actions results for previously what to we still are revenue to dependent achieving have took category our revenue The XXXX SG&A generating these positive adjusted our we've significantly expenses on relative communicated. While reduce in mix. breakeven

quarter the our days approaching given expected end are XXXX, of some the For on we we're as first results quarters remaining. the X of providing guidance

million. greater than $XX negative $X.X EBITDA expect be We and adjusted million than revenues to greater to be

more sector Looking year year, ever In as efficient business to of our in XX resurgence we Urban-Gro solutions year. cadence sequential growth than to stronger, more anticipate this our in the and closed cannabis position We million that has is in both backed building adjusted in Further, annualized been to demand as $X in sectors months. that supported for progress deliver XXXX EBITDA, we've right with the grow, contract we the by To our seeing and later million pipeline the for SG&A. over guidance. backlog at and of $XXX a reduction both been. regulatory date, see durable look revenues closing, believe strongest and the more to broadly a full and entire we the we're quarterly model expect continues multiple qualified increasing quarterly our in it by related

time. And the Dick will as Our business I details we the company need as the fundamentally capital bring you. credit turn in fourth now capital Dick? full support in and XXXX at is well into the Thank of results. quarter the that working not to secure put year see further discuss this that, to with we the of with line over to December, do call of place new

Richard Akright

This continued delays due the of $XX.X XXXX the license in is construction the the and as revenue Thanks, ongoing to the the well million in correlates was a as as in impacted million decrease $XX.X was because shift administrative everyone. movement revenue fourth to reduction result with reductions pack. in cost or million of mix all prior and good million associated $X.X period. expenses of negatively increased margin in afternoon, build $X.X million equipment services fees financial the U.S. the rescheduling into in million, Brad, well quarter state-level process revenue $X.X and fourth revenue prior project in the toward quarter expenses expense. design of Revenue lower The revenue revenue soft was such of of profitability. general a demand an year lack revenue. or revenue $X.X of by Construction decrease in was Gross cannabis of that of an $X.X The in of was million. development decreased The support XXXX regulatory general fourth the market revision million of by XX% effect key categories, prior in and with quarter in increase year in pushed onetime associated compared safer as of to Equipment awarding and result average increase of result This $X.X in in million administrative impacted period. of XX% decrease compared of million project were costs a $X.X XXXX. gross increase to in design profit of construction The of reduction a professional the and the professional $X.X year net defense of an including in to costs million the the bank revenue industry Operating projects models period, several the was representing being XXXX increase quarter further legal the and million. and in million increase expenses build as in revenue systems services operating $X.X fourth $X.X profit in build design a expense increased number $X.X employees. personnel compared business Systems

compared Net On and will receivable litigation administrative prior with an The $X.XX in million by basis, to XXXX, expenses. year the in operates by down the softness we've as EBITDA in on reduce outside was U.S. offset driven in little continued in negative acquisition. it and from were million the in negative and the in the sustained market. guaranteeing of CEA were decreases over predominantly general been in able decrease million negative sectors and remaining share $XX of by million full from $X.X a systems XXXX. Net million momentum adjusted gross to build spending X.X%. recognized a fourth lower per design contingent equipment in interest the related by which increase expenses this $X.X XXXX in impact $X.X demand loss expense to loss negative a cannabis comparable to in million a million the Non-operating $X.XX $XX.X negative of compared period. mentioned, our some million $X.X This year related in significantly $X.X well increases a Further, a incurred to negative profit favorably revenues revenues of as $XX.X the the compared million XXXX market. general in $XX.X our has the X the of of the was that results associated loss was in million the in which an million significant consideration more provide commercial fourth $X.X increase the primarily the fourth EBITDA settlement and which context XXXX of to of of $X.X revenues in Brad driven revenue $X.X prior total of period. in included impairment loss reported compared diluted an diluted WR EBITDA construction related Adjusted expenses As $X in or later. or million, to we loss annual prior to expense net company increasing adjusted was fully in representing quarter of $X.X increase prior and share was fourth to year quarter million year, I'll year period. revenue million compared $X.X per the of a as quarter administrative million net quarter was

Now the a $XX total tied and ABL on needs, working $X.X place necessary clients' and to that purpose our of million put us to drawn the to XXXX. capital million December are entered of line manage in providing our flexibility sheet. XXXX directly we capital The balance We serving in projects. working with cash is which turning is its $X.X our million

tied December balance to that anticipated million mid-January to at fact, XXXX of collections XXXX. late In the from is moved drawn year-end $X

are consistently down our provides as on the flexibility We needed our and ABL to adjusted EBITDA to return growth AR our paying XXXX. and AP support collecting we positive in

build drove balances design receivable As was a year-over-year basis. and construction payable to increased revenue increases expected, on

Moving to reported backlog.

as half $XX XX% XX, backlog the This million million Approximately was comprised of design total of $X attributed in third XXXX, to or experienced this construction we increase fourth systems quarter quarter $XXX million earlier. of XXXX. December that million, increase and professional of approximately detailed over delayed in million the Our of of and $X delivery project sequential a $XXX backlog is equipment is build, contracts. the services

$X departments. reductions correspond identified able expenses, than revenue million that previously variety expense we in on mentioned, XXXX, Those in to marketing general XXXX. have to compared will As to be savings expenses to ensure we more personnel-related all expenses of as and XXXX positive administrative reductions fees, other based EBITDA in projected expense a will of adjusted our professional and across achieve

the I the Additionally, set that in XXXX, the X goals Financial on Services division more strategic will assist has basis. sequential delivering company company results a feel of in primary consistent

to build a all sight development improved on weekly are and better improve will First, and a teams can reporting billing on cash ERP operations system, real-time performance operating that business projected construction projects same of basis including accordingly now line targets on on the accelerated plan tactical on provide our design so with both they adjust flow. basis, entities

of on overall build reduce primarily which in us margins in reductions our for line which cost our That maximize projects, open in our call and will prepared costs; manage to order in credit, insurance design and will, remarks. projects. utilization opportunities turn, of Operator, questions. and third, strategic vendor facilities aid enable increasing to the the please cost, relationships concludes drive better Second, on purchasing construction

Operator

Lauriers Des with Eric from comes question first The Instructions] [Operator Craig-Hallum.

Eric Des Lauriers

in the seen First project things just cost is delays Obviously, few large in hoping I Cost can could of a bit projects. quarter. expand newer, delays past. one or the think. couple the happen you revisions a these the from me, revision a especially on and project with We've

would color helpful. be more very on happened in any of what the just quarter kind So

Bradley Nattrass

weeks the would they materials So procuring of to asked kickoff in hope both had that dates push pushed. three of to their site, kickoff them, on January. back at that held procured, we first it December in still Two started date, which was and we until projects the to two We expected QX, those We clients kickoff. be to start December. the deliver in

So we did that.

year. existing in expected The we also QX. that QX, project in no early project, project, there but in was business it pushed a we was had announced the and from And third an revenues completed the significant had recreation

resumed we active couple everyone that actions happening on with and disappointing services, effect from in took revenue, our takes middle have was what's done reconcile after invoiced. was of Actually month And it or work projects, of in projects. contracts, I they're that same momentum come now about time, services our in QX. XXXX. on a the now quarter by working expect to or that's we're will the finish a Overall, them When has the in larger majority would have So probably of longer But on has And move, effect all material when amount moves, services We recording at that, last three we it increasing to the with XXXX, about effect. engineering said a the to and surprising I a all quarter in continue all moving there it the line those three for they of two of longer did active, ERP revenue less in that we sign complete we one saw.In we get the into go times what's the QX. why they'll be before. an with we an a quarter. moving organization. it to projects, months, quarter of but were the sector, feel XXXX new as fourth end sight two on one an been and addition unexpectedly, at now The the no That's CEA than disappointment.

two is. on where a And a dollars for million of that on equipment, it as in QX left, than days about held solid give then disappeared. just push. end didn't today They exactly we guidance hoped of at right so They the we that even tail would XXXX. have finally with be only higher disappeared projects we And couple grasp just

strong So it also moved a fundamentals they issue construction it's it's QX. contracts, -- it's course, term the and just it's disappointing, but timing hurt with the into company, of long weren't is the And of doesn't the very they news timing a lost, issue.

that In you want to take terms of project Dick, please? costing, do one,

Richard Akright

revision, we that a Yes, comment certainly occurred We did during on let quarter. that cost me the Eric. that, cost project a had on have increased

the of project revision and of finalized to construction for with customer didn't by that that order a in cost, the the we to part the negotiate working which through we But go revenue is, calculations get negotiations the increased account end way those so we things contract. with the in to terms couldn't now. year, revision have the a are costs because way have flow is the we include for that, industry We financials of right as needed it contract our the contract our of contract way with in

as quarter. we in cost the felt have that are let to that through need come when that this, too just going project needed situation account, And contract revenue just like able accounting revision we're the like that to increase negotiate happen the that'll the to you and that a you confident in construction be atypical We XXXX. not for I industry But in an say, contract show that we for it half highly to does. the of first

Eric Des Lauriers

of I'm I QX you QX visibility this have guidance guidance, right both kind visibility with kind some is have future revs system the every in now impacting 'XX same delays well? project positive weâ€™re into then improvement largely being ERP fiscal to think done to that just then what in ERP it? overall revisions suppose sort if from those, delays for overall Is how these about cost potential you'll just entity EBITDA, that wondering, something the legislative obviously And of of now. those the just the and $XX the within all thinking of of system the these both million follow-up in and cost that you of I'm on have guidance revisions just sequential and on as the that on catalysts on terms and for But quarters? potential about cadence? better then -- what includes is, in levels. any wondering visibility guidance, just of now And

Bradley Nattrass

when The even regulatory active guidance have space. one. not cannabis last the in until them money, clients, in and spent therefore considerable have design state and legal and licenses, the -- space, they that does existing a funds that in catalysts New awarded But the have getting the some we build. haven't that access York their clients states license of potential We any alone like award CDs. is -- with start multiple licenses have got And of include to Eric. designs of they go I'll amount delays to the considerable awarded, cannot build do projects when their

So of ongoing and we work that we're build. some some a for and and the design just design both dispensaries our more operators business. clients, multi-state more country, across now, single doing right lot operators work do have state on And

sight, As to line right don't anticipate relates any as delays. of additional we now, it of

up could anticipate happen, you end However, never with what know but of year. look, the We came three don't course. any weeks' notice now of at those the

ERP, that same it at projects will won't have team, we're then that's one that early with -- And portal, client and there our delays from really both build first. as the that's through project of project as the tracking time, our have pushes.As portal answer, and started see from the management viewable office. had delays we it many come we'll impact online through I then management As the working in we more them the of material have if for time, on

middle had ERP, the And actions under had mostly since timely service we taken and to results. coming disappointment we that as December. is tied tabulation the the of late that's of where have On we even forecast in as

guide. four sequential, on with are next portal two management a And When really to over have about a anticipate know so talk contracts us to when we project off I be executed. I the months exactly they'll services standpoint. be in executed we not They're from construction that again the the do and

So completely as we're and then into long with baked. have QX as proceeds forward confident, with days we But left. everything course, very it's anticipate should to then line. we it don't and we've and issues confidence improving back predict our talk And top sequentially realize ability like in beyond, the the as quarters. bottom we QX two definitely walk the of got to in that earn And we go not contracts

Richard Akright

And it, Eric, insight visibility as over and the backlog the large is are starting quite XXXX. are just much evidenced, on really we costs course those design commenting into getting projects, come build to and into those for site of construction on better projects how

that's last just much the system six just with weeks. even ERP really the in that improvement put we've on So new place, improving over that

So that wanted add anyway, comment. just to

Operator

comes from MKM. question Next Scott Fortune ROTH with

Scott Fortune

and or backlog little Just color industries. ongoing of different kind on a the of here kind the Eric, a CEA discussions little on and follow-up provide bit of more those opportunities outside on

kind strength of --is unpack And you're coming the industries. the Anything little on of $XXX color, or markets of the Just of projects a color strength be in? little of CEA kind more million? great. a would Just that of you're within the on end different seeing the the the more industries highlight seeing. CEA, how even categories from And then much that the is backlog then versus just because bit non-CEA some of

Bradley Nattrass

start on Dick, want the backlog? you do to

Richard Akright

Yeah.

and have projects I'm of -- CEA sorry, I'm backlog. design construction a getting build $XXX now. do are what But from to have in We is million we perspective, from large backlog sector. some the amount substantial the that is coming in it the So

CEA. the A of now is of As of projects. some is construction portion December CEA comprised XX% from XXst, large

makes And the so of the year. for part biggest up that backlog the

healthcare we On existing a some it's when the are the secondary existing tended CPG are into be into place the education that part that customers in company additionally customers the acquired it, to that we're large contracts was that were but out commercial with customer, which expanding side, and -- backlog. of that that

Scott Fortune

follow-up. Just kind more backlog little the on out? little kind just CPG of those out the bit, color a build as healthcare a quick see And of you to Do diversified going you opportunities. switching bit

Bradley Nattrass

that take I'll one.

Scott, take that we're CEA in as cultivation building as us So the the quarters. can on six side, when facility long

space completed three recreational had On side, a to the officially some we're signed in first it's week, up contract or a when a in commercial can as or quarters. manufacturing example, the quick is the could in be when those it if for as we're the period that like is to. in year What two be awarded we to PO sent months. project a not buildings is underestimated or a verbally laboratory, like used can commercial CEA facility It or be is

hit the recognize running, to steps so we And immediately quickly. once do ground ready. so those exactly what cost, get recognize projects, they do weâ€™re start, revenue going can They verbally and us told and

signed. once So they're quickly relatively done they're

working build like like contracts facilities then both we over an projects well. we high frame multiple But these in In Dick all facility a would mentioned, of quarters So the healthcare, terms engineering MRI smaller healthcare there. no that, of relatively architecture the And three hospitals, time work end some have design be on. $XXX,XXX we're $XXX,XXX that quickly markets, right is between as and sometimes as post-secondary, design, margin done now lot less. on so and or on something that

six where commercial over to course, $XX path as when to when last is experts million, million a far, troopers back And over everyone, further that, stop a to but that to that have but listed we're continuing the professional all the So the some we of paid rather opportunities off secured down our on nothing invest little we and industry step right site thus NASDAQ, you and other strength not the learned resurgence, up talk diversification and retail, Laboratories, any longer, out, that for as there's we've to going good the of on project go we cannabis seeing laboratories. of our strategy in out now well taken company us didn't quarters, the hopes does utilize have than because We're for think going on set side. about you set also on build we've is can quicker that what and on $XX areas. then strength retail we're And its sectors take strong there. us.And when path we nicely all in really future. has services managers business nicely for which

that of be on expertise talent we build in. or regardless sector big on and So of the that used the can it's pool have what design

back So it future. and the have credibility to we exciting in quarter-by-quarter back. earn But to execute today, for bringing

Scott Fortune

And as discussion in we here capacity from of in of follow-up the York, of cannabis of seeing just adds Just key production CEA to But lot New down we're kind capacity a discussions you're They of ramp hearing kind for to out comes in having second on on is you're industry? or cannabis actually standpoint? of kind We're out. states a out builds And the in kind of a like need of capacity for forward, potentially there build sense this Florida. you fall quick state is ahead color MSOs board build the in regulation Obviously, of story the seeing Florida then the one rescheduling the your But growth that the moving potentially, led when on pipeline, flipping. mentioned Ohio big a But 'XX. then lot opportunity still see the half? dependent that play on happens. the of side. me are looking

Bradley Nattrass

lots dispensaries. The so planning build a facilities that little the discussion, Jersey, of planning. design the of further of Ohio, standpoint, York, be to lots Florida, road. want and operators contracts, But but these New of I New from the state, down the or will a Pennsylvania states get design the could no believe in

pulling happen, having that finish right Court to be it'll in anything a right? Florida the Florida crossed ballot, First Supreme And above then fingers before over that total not then Xst, say doesn't April with have XX% and they hurdle now. on is the they're that

cry right rallying exciting industry say, the now, of sort that's in I'd Florida, on the eyes of for lots sure. So

leaders getting what put on capital, Pennsylvania that's give there. said it capital, build per million multi-state larger to design operators the funds XXXE to million, But expand of -- them. and their working we year rescheduling and those going with is to that $XXX in ballot footprint. of And have the the We that's these Second dispensaries and the abolishing some and rid they're in back facilities publicly going $XXX working does. and Urban-Gro getting

very the company rescheduling I will feel for happen. So it positive that be should

working And Scott, say right that'll is of not the for bring Let's than in the is biggest in. seen couple for now there. optimism but positive that's still terms years, of money capital for hurdle more there I've banking, sure, a sentiment

And of sort so everybody have some catalyst. we to is positive but got

Operator

from Vendetti is The next Group. question with Anthony Maxim

Thomas McGovern

is Thomas This McGovern on Anthony. for

a little wanted just hone to SAFER call, back regulatory it you've yes, Act. to So on more about of know I this touch I some the front, in a Banking bit but kind on talked this on of quite bit

you not as of that mentioned horizon, see considered would pipeline like want to this how you have ignoring in if with just out its the I deals. just us legalizations, maybe progress to frees are act terms of a that But of lot play do projects that You guys to up, funding potential any backlog be potential more kind in were expect funding these passed, that a tell projects are once kind just catalyst that 'XX? on or of yet statewide importance

Richard Akright

sure, early is serious. out very received backlog a have times of and taken working deposit we items the and We've backlog treat contract in And we we're thereâ€™s our signed actively To to of a in there's couple on actually it. Thomas, XXXX. for have right? equipment, answer backlog, be

So we one to barometer really truly a we're want six going that to quarters. be how the next perform in to of

we when have And backlog. of would in signed catalysts one pipeline pipeline and once that a it lot have of Right growing be gets. so those there pipeline. but size we fit strong in absolutely now, the don't itâ€™s announce of becomes would qualified a the that projects We

access the to institutional as to would potentially investors easier, the and more the Banking, then access SAFER exchanges well. list capital SAFE with or Banking larger and so And efficient -- that on have allow operators

be So phenomenal industry. the that would for

decade, rights. for five or state don't three interstate still a legalization We you Now or maybe federal state legalization -- or interstate also commerce did mention years. to see commerce legal

for be state future foreseeable will this think for I the a gain us.

Thomas McGovern

that with on aggressive some not that or on whether maybe because And work, some an accelerating in signed have this touched pulling international a just recent haven't of headcount like. of that And to was would back maybe how the had lot I you pulling done now dive law guys on, passed associated really news do ago the wire, could that of to yourselves Bill although, comment, then call with another half arenâ€™t But thing and further. and or that But of expenses was back guys provide -- know maybe I whether again, that that know on you expenses chance effect revenues kind with 'XX? the color called published marijuana the out headlines Germany the reducing shape? you you subsidiary, into been are conversations the had specifically markets, want into see I or saw front. and were Germany's that the wanted back if a I and X hours where hitting I you hitting does know you in saying into clients just would And news, take becoming potential Monday. to or you that article it I -- you Germany? of more not on the that I play that having know

Bradley Nattrass

like sort it's with US, issue cannabis. grow is be where licenses, of to The social so Maine their social clubs people the in Germany own can going

while so going for that a out take it's to build And to develop. market and to

near So three lot operators country in opportunity. don't existing I the term There's see now. a of

then grow two be horticulture Europe actively space, a be all farms and broke that signed on think Switzerland, Israel in and So we Portugal, entered vertical a Europe, in our And suffered prices on Europe we service Portugal. entity of we sure built XX the closely. hotel about can and will wait cannabis of first had to out. overall, like will up think, anymore. years.So them to we'll urban watch I year. so profitable in do. to the they and into companies In I a when it, funds centers, And the couple and build going a had absolutely out probably years contract in ago, to in example. what havoc later, we're run in ancillary around to have right company. over distribution team that the just now industry there. in near fortunately energy But projects had strong designed groups, And or month manufacturers be the we war We we working that We're right? green food sprouts wreaked -- we skyrocketed. Eastern And horticulture couldn't that we out just for that marketplace, enough we have really burnt a show centers considerable built is for the And Netherlands. we

there. phenomenal And individual wasn't leader, great director who but so business the is a a the managing is

others. want experts is some group, have here, be facilities we I [indiscernible], have built we experience an But into There's director the that there. and in There's Europe. that the not do expertise. hundreds key the of course, of over couple on a we've kept to managing aggressively international want a that deliver to we that because believe outspoken align and most lot going So horticulturists of design, growing facilities to spread. of be We released

lines about Similar the down being and able a So funds. raise it's bit to same with we're and just of the all keeping US, multiple capital communication groups it their little our slowing open. to story, it's

So some pipeline earlier about We've -- for Europe we design asked in funds. won't got as they well, you builds materialize strong those strong they pipeline. access until but the our some have can

Operator

Eric is next Up with Beder SCC Research.

Eric Beder

some questions talk I been of my other want have here. answered, to about but Most things already

space, commercial businesses winning client pitch is at what niche, hiring these are you you the why -- for how the On and you your the the people forward? look business, and is what to commercial what are when the

Bradley Nattrass

equipment to plus of one So there's like lot far for others. niche space. world been space, responsibility single to own or $XX $XX the around one of project infrastructure, that had commercial now, the design to service us around their had and engineer, the they of quicker the GCs responsibility it allows out single in $X not directly point make point large the at don't architect -- We've good firms is one say complete want the right then is to big facility it operate But we hire these we a having type on clients us roof, a a before. projects, we're do those us on jobs contractors. the largest Stantec, then we that. companies money hire through would million. like under have so we for million, job go in all to that to And the levels. billion, clients their XX large build We larger can AECOM they of Fortune for Solutions, and that under an or Jacob find at access an or the the They've have themselves, have, $X than procure among $X.X able the billion project all either all that provides managers it. billion realized smaller able and projects It's can really turn quickly and operate companies,

it's right we've got niche So would increasing as perfect future, right now, at us. look for expansion, But size. the In we now, great it's size working. and continue a the a we

Eric Beder

a has business been number equipment for now. of tough the years And

you deal? deal, Are better go of when be in should buy that from that are How they back you able be give a what seeing potential on the a these potentially you manufacturers, other margins less better? players So equipment terms side to be to or there more out that we of to even comes thinking about there? that generate to used to equipment when are

Bradley Nattrass

are some of So force, years. over large tough reductions longer manufacturers controlled for cannabis side last two A lot ag of for no on the in environment horticulture, the operation. been and it's

success LED in to standpoint, we're a refresh of that have us product line. as we go feel market help have they when go with lot have now, a to facilities, good relates or efficient I as they're the really hire Right with with relight, provide them And with out more early and strong relatively that for build the to forward, able out to our clients strong us, relationship or for strategic value their opportunity out to They sales relationships we're we're build rebates. really partnerships and now to manufacturers. selling to cannabis US to there's that client a ability can with these low stages So where their don't therefore, the that had for and one chance trust of one just example, team some working their be amounts to Moreover, them. lighting, phenomenal and energy from in it design area path and energy end purchasing could And it focusing a an our from from to nice them gives rebates, the a if advantage. and procuring easier example, we've of purchasing capital facilities on pocket. take working to

So when tough for get in you find equipment, win. tough been a and way everyone it's times -- to to

large adding doing.Moreover, been able into definitely to what mechanical a conditioning integrate air retrofit systems in. successfully that center, that's equipment and we distribution mechanical or were able we've first super integrate so And to systems large equipment our have we been to by

Now important project. of to that part larger we -- when a note, equipment's

financials environment as to and marketplace. equipment -- our to equipment separate the really show the ag up on that line part So of the equipment not side as controlled commercial will a is

we us that is the as equipment gives construction can so confidence, construction side in the the XXXX. mentioned earlier, our into built that increase in margins Dick Our

other fourth Now unfortunately, we project went way. the had a that one quarter

that explained, in margins increase But are time, looks just to it point days. initiative on underperforming we're Dick XX as but things like a in in that QX. QX, So was

for get go to it and the decreased that get back to project was into a order to place we work ourselves. we change Now

this all in So we our increasing on are margins really categories year, focused Eric.

Operator

The next with Berlin. question comes First from Ellis Acklin

Edward Acklin

guys. can If back around I for breakeven the I last the just initial we believe number on magic discuss -- the got insights was time guide, the you into for a your QX one guys were we million EBITDA call, reach topic QX. Thanks circle needing about with to to XXXX to $XX in talking adjusted you revenues.

your to positive So there. comments can new me in million those $X revenue trying I'm guide out help you just of Maybe with square and a EBITDA.

Bradley Nattrass

But the that So mix, revenue all, sort already the $XX right? it to all on depends, if high $XX million. $XX you need we've would first million of construction, million. of at lower So it's in margin looked

Now couple were side. us didn't we we construction, we we margins around as XX% thought in took to We of the we to same did QX what on things talked. a increasing the project we're were everyone show realized third in back making at not really that the that because weren't look In what have of around, it digits. that one beginning A, billable professional in We But as goes in down -- of productivity. you progress professional when on we when at I that we happened. mid low quarter, just single show were. ERP got we're services, productive the hours, services the also

our have we're should of them And goal above their because what So of million up all in pay In XXXX, salaries. professional our all tracking of be in we adequately. XX%. down COGS we QX, actually COGS had to providers, to service we're salary, billing put $X.X into is

margins, when SG&A, one from I'm talk Dick about SG&A maybe to going side? Dick, increasing that's shortly, a then lot in you better. the one But we're areas areas have on chime doing back of but will on where tag the here apart of the the we that's to So the the focus

Richard Akright

take it to when certainly for lot of a we guidance number like was to Ellis, larger us I right, going on go a initial breakeven QX, on for your to be before And point, talked with you're looked the revenue that revenue mean, forward basis.

a will still for of G&A that percentage little significantly a point. right on but are are decent goes million XXXX, we reductions all be that it point It's that those to report But of flowing place it's really even in breakeven show million our been forward basis, to mix immediately of reducing amount, back again, made from With like bit for the XXXX. it's able to revenues being And construction. see our breakeven to QX when we've that dramatic they're QX When a rather to going with now XXXX and going for standpoint $XX having cuts, and just breakeven you that us. income going the through taking numbers. into do the we the And of year-over-year us statement. is G&A going the be high now you're around depends we up see reductions -- to of $XX looking how revenue, have more reduce because there

Edward Acklin

guys the I any improve margins to just sort was or to were the wanted on hear up to get equipment whether of you to in banking anything that that going pick target.

So appreciate that's I very helpful. it.

Bradley Nattrass

I smooth with everything Look Germany seeing kickoff. everything And hope I looks the Ellis. you, hope you on you're now. -- right soon. Monday in forward Thank to Ellis,

Operator

you. Thank

question-and-answer closing of end the to We now I session. over the will for have call remarks. turn reached And the management

Bradley Nattrass

very confident the the break issues. strong ability our We're team, issues confident, we term have deliver fundamentals, from delivering. our that earn also to But management year. every And confidence largest happened, focused to down market I'm why right? this, disappointed the the -- sure, negative for results, we're credibility longer And that's we the the and can't on just the none change quarters EBITDA company's this to about and it. future tied know I'm extremely it's Every adjusted and -- shareholder, negative the are we're it's tactical, of QX quarter confident, positive doing strong, I'm is explainable, closing, theyâ€™re In disappointed. company, when is secure. John. we're you Thanks, in the model

today. So earnings a nice probably evening. for time a month talking thank your forward QX you Have look to in you for call. And our to

Operator

may Thank time. participation. this you your at disconnect you conference today's concludes for and lines your This

urban-gro (UGRO) 27 Mar 242023 Q4 Earnings call transcript