What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-08 · 106 added, 55 removed, 150 unchanged (52% of the section changed)

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We are actively monitoring these developments and exploring strategies to mitigate these risks and potential negative effects on our business and results from operations, including negotiating with suppliers, adjusting our pricing strategies, moving our supply chain away from countries with higher tariffs in favor of other jurisdictions, and seeking tariff exemptions where possible.

On June 6, 2025, we purchased substantially all of the assets of Hydro Generation Inc.

(referred to as "Viagrow"), a domestic supplier of gardening and hydroponic equipment.

The acquisition further diversifies our home gardening and hydroponic gardening proprietary brand product offerings as well as expands our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

Refer to Note 12, Acquisitions, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding the Viagrow acquisition.

MARKETS AND BUSINESS SEGMENTS

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We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation.

Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, and more, the development and expansion of which are a key component of the Company's growth strategy.

Our target customers include commercial and craft growers, as well as home growers, in the plant-based medicine market, and commercial and home gardeners who grow organic herbs, fruits, and vegetables.

Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, and retailers in the specialty retail hydroponic and organic gardening industry.

We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers.

Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of March 31, 2025.

Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, Viagrow, and more, the development and expansion of which are a key component of the Company's growth strategy.

Our target customers include commercial, craft, and home growers in the plant-based medicine market, as well as commercial and home gardeners who grow organic herbs, fruits, and vegetables.

Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, major home improvement mass-market retailers, and retailers in the specialty retail hydroponic and organic gardening industry.

We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to mass-market and independent resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers.

Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 29 retail locations across 11 states as of June 30, 2025.

We closed two retail locations during the three and six months ending June 30, 2025.

We continue to evaluate our retail geographic footprint for redundancies in our fixed cost structure and for opportunities to serve our customers through other retail locations and our online platforms.

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As of March 31, 2025, we have substantially completed our restructuring activities and do not expect to incur significant additional restructuring and restructuring-related costs in future periods.

Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including $1.1 million during the three months ended March 31, 2025 and $2.4 million previously incurred in fiscal year 2024.

Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including $1.1 million during the six months ended June 30, 2025 and $2.4 million previously incurred in fiscal year 2024.

As a result of these restructuring activities, we expect improvement in our gross profit margin and profitability while generating annualized cost savings of approximately $12.0 million.

Our restructuring and restructuring-related charges consisted of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.

Restructuring and restructuring-related costs incurred during the three months ended March 31, 2025 were presented on the Condensed Consolidated Statements of Operations as follows:

Restructuring and restructuring-related costs incurred during the six months ended June 30, 2025 were presented on the Condensed Consolidated Statements of Operations as follows:

Restructuring

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Total restructuring and restructuring-related charges $ (1,141)

(1) Costs consist primarily of fixed asset disposals and lease contract termination costs for previously closed retail locations

(1) Costs consist primarily of property and equipment disposals and lease contract termination costs for previously closed retail locations

(2) Costs consist of corporate operational and administrative contract terminations

In conjunction with our restructuring activities to support operational and administrative improvements, we reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $0.6 million increase to depreciation and amortization expense related to property and equipment in the three months ended March 31, 2025.

These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025.

As of March 31, 2025, there was no outstanding restructuring liability.

However, certain facilities costs or contract termination costs related to closed retail locations for which we are pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032 at the latest.

In conjunction with our restructuring activities to support operational and administrative improvements, we reassessed and shortened the estimated useful life of certain capitalized software assets.

These capitalized software assets became fully amortized and were retired during the six months ended June 30, 2025.

As of June 30, 2025, there was no outstanding restructuring liability.

Refer to Note 15, Restructuring, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding restructuring activities.

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Since our founding in 2014, we have acquired or opened numerous specialty hydroponic and organic gardening center locations.

Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of March 31, 2025.

Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 29 retail locations across 11 states as of June 30, 2025.

We have also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI.

We regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates.

We regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates, such as the Viagrow acquisition, which further diversifies our home gardening and hydroponic gardening proprietary brand product offerings as well as expands our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.

Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in controlled environment agriculture, industrial and country club verticals.

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R ESULTS OF OPERATIONS

Comparison of the Unaudited Results for the Three Months Ended March 31, 2025 and 2024

Comparison of the Unaudited Results for the Three Months Ended June 30, 2025 and 2024

The following table presents, for the periods indicated, selected information from our unaudited Condensed Consolidated financial results, including information presented as a percentage of net sales:

Three Months Ended March 31,

Three Months Ended June 30,

2025 2024 Year-to-Year Variance

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Other income 463 1.1 % 713 1.3 % (250) (35.1) %

Net loss before taxes (9,377) (26.3) % (8,839) (18.5) % (538) (6.1) %

Benefit for income taxes — — % 2 — % (2) (100.0) %

Net loss before income taxes (4,811) (11.7) % (5,801) (10.8) % 990 17.1 %

Provision for income taxes — — % (95) (0.2) % 95 100.0 %

Net loss $ (4,811) (11.7) % $ (5,896) (11.0) % $ 1,085 18.4 %

*Percentage is not meaningful.

Net sales for the three months ended March 31, 2025 were $35.7 million, a decrease of $12.2 million or 25.4% as compared to net sales of $47.9 million for the three months ended March 31, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $30.9 million for the three months ended March 31, 2025 compared to $43.1 million for the three months ended March 31, 2024.

This decrease in net sales was primarily due to the closure of 19 retail locations during 2024, which included the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan.

Additionally, the decreased net sales for Cultivation and Gardening related to reduced e-commerce retail sales volume, slowness in durable product sales, as well as discounting products that were discontinued in conjunction with the 2024 restructuring plan and strategic rationalization of our product offerings.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended March 31, 2025 increased to 32.0% as compared to 22.6% for the three months ended March 31, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

The percentage of Cultivation and Gardening net sales related to consumable products for the three months ended March 31, 2025 was 74.6%, an increase from 70.0% for the three months ended March 31, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products.

Net sales of commercial fixtures within our Storage Solutions segment remained consistent at $4.8 million for each of the three months ended March 31, 2025 and 2024.

Net sales for the three months ended June 30, 2025 were $41.0 million, a decrease of $12.6 million or 23.5% as compared to net sales of $53.5 million for the three months ended June 30, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $32.9 million for the three months ended June 30, 2025 compared to $46.1 million for the three months ended June 30, 2024.

Additionally, the decreased net sales for Cultivation and Gardening related to slowness in durable product sales, as well as recent declines in consumer confidence related to uncertainty surrounding the impact of potential tariffs.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended June 30, 2025 increased to 32.0% as compared to 21.5% for the three months ended June 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

The percentage of Cultivation and Gardening net sales related to consumable products for the three months ended June 30, 2025 was 78.0%, an increase from 73.0% for the three months ended June 30, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products and slowness in durable product sales.

Net sales of commercial fixtures within our Storage Solutions segment increased to $8.1 million for the three months ended June 30, 2025 compared to $7.4 million for the three months ended June 30, 2024.

Cost of Sales

Cost of sales for the three months ended March 31, 2025 was $26.0 million, a decrease of $9.5 million or 26.8% compared to $35.5 million for the three months ended March 31, 2024.

The decrease in cost of sales largely corresponds to the 25.4% decrease in net sales, as previously discussed, and was partially offset by reduced inventory discounts from vendors.

Gross profit was $9.7 million for the three months ended March 31, 2025 compared to $12.4 million for the three months ended March 31, 2024, a decrease of $2.7 million or 21.5%.

The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $2.4 million, or 23.4%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan.

Additionally, gross profit from our Storage Solutions segment decreased $0.2 million,

or 11.6%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to increases in installation labor costs.

Gross profit margin was 27.2% for the three months ended March 31, 2025, an increase of 140 basis points from a gross profit margin of 25.8% for the three months ended March 31, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 25.6% for the three months ended March 31, 2025 as compared to 24.0% for the three months ended March 31, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

The Storage Solutions gross profit margin decreased to 37.6% in the three months ended March 31, 2025 from 42.7% in three months ended March 31, 2024 due to industry pricing compression for the Storage Solutions segment.

Cost of sales for the three months ended June 30, 2025 was $29.4 million, a decrease of $9.7 million or 24.9% compared to $39.1 million for the three months ended June 30, 2024.

The decrease in cost of sales largely corresponds to the 23.5% decrease in net sales, as previously discussed.

Gross profit was $11.6 million for the three months ended June 30, 2025 compared to $14.4 million for the three months ended June 30, 2024, a decrease of $2.8 million or 19.6%.

The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $2.8 million, or 25.3%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan.

Additionally, gross profit from our Storage Solutions segment remained relatively flat at $3.4 million and $3.5 million in the three months ended June 30, 2025 and 2024, respectively.

Gross profit margin was 28.3% for the three months ended June 30, 2025, an increase of 140 basis points from a gross profit margin of 26.9% for the three months ended June 30, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.8% for the three months ended June 30, 2025 as compared to 23.7% for the three months ended June 30, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

The Storage Solutions gross profit margin decreased to 42.3% in the three months ended June 30, 2025 from 46.9% in three months ended June 30, 2024 due to industry pricing compression for the Storage Solutions segment.

Operating Expenses

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization.

Operating expenses were $19.6 million for the three months ended March 31, 2025 and $21.8 million in the three months ended March 31, 2024, a decrease of $2.2 million or 10.2%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $8.8 million for the three months ended March 31, 2025, compared to $10.6 million for the three months ended March 31, 2024, a decrease of $1.8 million or 17.3%.

The decrease in store operating costs was primarily due to the 19 retail locations closed during 2024, including the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan.

This decrease was partially offset by the additional $0.8 million of restructuring costs incurred in the three months ended March 31, 2025 related to fixed asset disposals and lease contract terminations costs for previously closed retail locations.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $10.8 million for the three months ended March 31, 2025, compared to $11.2 million for the three months ended March 31, 2024.

Selling, general, and administrative costs decreased by $0.8 million or 10.1% for the three months ended March 31, 2025 primarily as a result of decreased employee costs and professional fees.

This decrease in selling, general, and administrative expense was partially offset by a net $0.6 million increase in estimated credit losses in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the three months ended March 31, 2024.

Operating expenses were $16.9 million for the three months ended June 30, 2025 and $20.9 million in the three months ended June 30, 2024, a decrease of $4.1 million or 19.4%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $7.9 million for the three months ended June 30, 2025 compared to $10.2 million for the three months ended June 30, 2024, a decrease of $2.3 million or 22.9%.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $9.0 million for the three months ended June 30, 2025 compared to $10.7 million for the three months ended June 30, 2024.

Selling, general, and administrative costs decreased by $1.0 million or 13.4% for the three months ended June 30, 2025 primarily as a result of decreased employee costs, share-based compensation, corporate expenses, and professional fees.

Additionally, depreciation and amortization costs decreased by $0.9 million or 25.7% for the three months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.

Other income was $0.5 million for the three months ended June 30, 2025 compared to $0.7 million for the three months ended June 30, 2024, a decrease of $0.3 million or 35.1%.

The decrease in other income was primarily attributable to decreased investment income on our marketable securities.

Comparison of the Unaudited Results for the Six Months Ended June 30, 2025 and 2024

Six Months Ended June 30,

2025 2024 Year-to-Year Variance

Net sales $ 76,666 100.0 % $ 101,424 100.0 % $ (24,758) (24.4) %

Cost of sales 55,365 72.2 % 74,639 73.6 % (19,274) (25.8) %

Gross profit 21,301 27.8 % 26,785 26.4 % (5,484) (20.5) %

Operating expenses 36,449 47.5 % 42,731 42.1 % (6,282) (14.7) %

Loss from operations (15,148) (19.8) % (15,946) (15.7) % 798 5.0 %

Other income 960 1.3 % 1,306 1.3 % (346) (26.5) %

Net loss before income taxes (14,188) (18.5) % (14,640) (14.4) % 452 3.1 %

Provision for income taxes — — % (93) (0.1) % 93 100.0 %

Net loss $ (14,188) (18.5) % $ (14,733) (14.5) % $ 545 3.7 %

Net sales for the six months ended June 30, 2025 were $76.7 million, a decrease of $24.8 million or 24.4% as compared to net sales of $101.4 million for the six months ended June 30, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $63.8 million for the six months ended June 30, 2025 compared to $89.2 million for the six months ended June 30, 2024.

Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the six months ended June 30, 2025 increased to 32.0% as compared to 22.0% for the six months ended June 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches.

The percentage of Cultivation and Gardening net sales related to consumable products for the six months ended June 30, 2025 was 76.3%, an increase from 71.6% for the six months ended June 30, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products and slowness in durable product sales.

Net sales of commercial fixtures within our Storage Solutions segment increased to $12.9 million for the six months ended June 30, 2025 compared to $12.2 million for the six months ended June 30, 2024.

Cost of Sales

Cost of sales for the six months ended June 30, 2025 was $55.4 million, a decrease of $19.3 million or 25.8% compared to $74.6 million for the six months ended June 30, 2024.

The decrease in cost of sales largely corresponds to the 24.4% decrease in net sales, as previously discussed.

Gross profit was $21.3 million for the six months ended June 30, 2025 compared to $26.8 million for the six months ended June 30, 2024, a decrease of $5.5 million or 20.5%.

The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $5.2 million, or 24.4%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan.

Additionally, gross profit from our Storage Solutions segment decreased $0.3 million, or 5.3%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to industry pricing compression for the Storage Solutions segment.

Gross profit margin was 27.8% for the six months ended June 30, 2025, an increase of 140 basis points from a gross profit margin of 26.4% for the six months ended June 30, 2024.

The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 25.2% for the six months ended June 30, 2025 as compared to 23.8% for the six months ended June 30, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands.

The Storage Solutions gross profit margin decreased to 40.6% in the six months ended June 30, 2025 from 45.3% in six months ended June 30, 2024 due to industry pricing compression for the Storage Solutions segment.

Operating Expenses

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization.

Operating expenses were $36.4 million for the six months ended June 30, 2025 and $42.7 million in the six months ended June 30, 2024, a decrease of $6.3 million or 14.7%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $16.7 million for the six months ended June 30, 2025, compared to $20.8 million for the six months ended June 30, 2024, a decrease of $4.2 million or 20.1%.

This decrease was partially offset by the additional $0.8 million of restructuring costs incurred in the six months ended June 30, 2025 related to fixed asset disposals and lease contract terminations costs for previously closed retail locations.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $19.8 million for the six months ended June 30, 2025, compared to $21.9 million for the six months ended June 30, 2024.

Selling, general, and administrative costs decreased by $1.7 million or 11.7% for the six months ended June 30, 2025 primarily as a result of decreased employee costs, share-based compensation and professional fees.

This decrease in selling, general, and administrative expense was partially offset by a net $0.7 million increase in estimated credit losses in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the six months ended June 30, 2024.

Additionally, depreciation and amortization costs decreased by $1.1 million or 14.7% for the six months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.

Other Income (Expense)

Other income remained relatively flat at approximately $0.5 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

Other income was $1.0 million for the six months ended June 30, 2025 compared to $1.3 million for the six months ended June 30, 2024, a decrease of $0.3 million or 26.5%.

The decrease in other income was primarily attributable to decreased investment income on our marketable securities.

Use of Non-GAAP Financial Information

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Set forth below is a reconciliation of EBITDA and Adjusted EBITDA to net loss (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Net loss $ (4,811) $ (5,896) $ (14,188) $ (14,733)

Provision (benefit) for income taxes — (2)

Provision for income taxes — 95 — 93

Interest income (463) (737) (960) (1,339)

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Investment income 453 718 972 1,298

Acquisition transaction costs 50 — 50 —

Restructuring plan

Consolidation and other charges (1)

467 394 563 1,808

Adjusted EBITDA $ (1,302) $ (1,143) $ (5,332) $ (4,014)

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LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2025, we had working capital of $84.2 million compared to working capital of $88.9 million as of December 31, 2024, a decrease of $4.7 million.

The decrease in working capital from December 31, 2024 to March 31, 2025 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities.

As of March 31, 2025, we had cash, cash equivalents, and marketable securities of $52.6 million.

As of June 30, 2025, we had working capital of $81.7 million compared to working capital of $88.9 million as of December 31, 2024, a decrease of $7.2 million.

The decrease in working capital from December 31, 2024 to June 30, 2025 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities.

As of June 30, 2025, we had cash, cash equivalents, and marketable securities of $48.7 million.

Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital.

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Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

On June 6, 2025, we purchased substantially all of the assets of Viagrow, a domestic supplier of gardening and hydroponic equipment.

The total consideration for the purchase of Viagrow was $1.2 million, including $1.0 million cash paid and $0.1 million common stock issued on the date of acquisition, with certain additional amounts to be paid in future periods.

Refer to Note 12, Acquisitions, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding the Viagrow acquisition.

We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies.

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To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.

The following discussion sets forth the major sources and uses of cash for the three months ended March 31, 2025 and 2024.

The following discussion sets forth the major sources and uses of cash for the six months ended June 30, 2025 and 2024.

Operating Activities

Net cash and cash equivalents used in operating activities for the three months ended March 31, 2025 was $3.8 million compared to net cash used in operating activities of $3.6 million for the three months ended March 31, 2024.

The changes in operating cash were primarily driven by changes in gross profit and operating expenses, excluding non-cash changes such as depreciation and amortization, as previously discussed in the Results of Operations section as well as changes in working capital.

Net cash and cash equivalents used in operating activities for the six months ended June 30, 2025 was $6.8 million compared to net cash used in operating activities of $4.0 million for the six months ended June 30, 2024.

The changes in operating cash were primarily driven by changes in gross profit and operating expenses, excluding non-cash changes such as share-based compensation and depreciation and amortization, as previously discussed in the Results of Operations section as well as changes in working capital due to timing as well as store consolidations and the effects of the strategic restructuring plan.

Investing Activities

Net cash and cash equivalents provided by investing activities for the three months ended March 31, 2025 was $9.2 million compared to net cash provided by investing activities of $5.0 million for the three months ended March 31, 2024.

Investing activities for the three months ended March 31, 2025 were primarily attributable to investment of excess cash into marketable securities of $7.2 million, offset by maturity of marketable securities of $16.6 million.

Investing activities for the three months ended March 31, 2024 were primarily attributable to investment of excess cash into marketable securities of $21.1 million, offset by maturity of marketable securities of $26.5 million.

Net cash and cash equivalents provided by investing activities for the six months ended June 30, 2025 was $2.7 million compared to net cash provided by investing activities of $6.2 million for the six months ended June 30, 2024.

Investing activities for the six months ended June 30, 2025 were primarily attributable to investment of excess cash into marketable securities of $19.0 million and $1.0 million of cash paid for the Viagrow acquisition, offset by maturity of marketable securities of $23.0 million.

Investing activities for the six months ended June 30, 2024 were primarily attributable to investment of excess cash into marketable securities of $28.0 million and purchases of property and equipment of $1.4 million, offset by maturity of marketable securities of $35.6 million.

Financing Activities

Net cash and cash equivalents used in financing activities was $0.1 million and less than $0.1 million for the three months ended March 31, 2025 and 2024, respectively, related to common stock withheld for employee payroll taxes.

Net cash and cash equivalents used in financing activities was $0.1 million for the six months ended June 30, 2025 and was attributable to common stock withheld for employee payroll taxes.

Net cash and cash equivalents used in financing activities for the for the six months ended June 30, 2024 was $4.3 million and was primarily attributable to common stock repurchased under our share repurchase program..

Critical Accounting Policies, Judgements, and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis