Key Takeaways:
- Revenue in Q1 2024 significantly decreased compared to Q1 2023.
- Operating expenses reduced by 41% year-over-year.
- The company continues strategic review, including potential sale, merger, or dissolution.
- Gross profit and net income/loss metrics reflect challenging market conditions.
Financial Performance Overview
CEA Industries Inc. (NASDAQ: CEAD, CEADW) announced its financial results for the first quarter ended March 31, 2024. The company reported a substantial decline in revenue and gross profit, alongside efforts to reduce operating expenses and explore strategic alternatives.
Revenue and Gross Profit
In Q1 2024, CEA Industries recorded revenue of $235,000, a stark decrease from $4.7 million in Q1 2023. The decline in revenue is primarily attributed to lower bookings over the past twelve months. Gross profit for Q1 2024 was $(154,000), compared to $853,000 in Q1 2023, reflecting the impact of decreased revenue and the higher relative percentage of fixed costs.
Revenue and Gross Profit Comparison:
| Metric | Q1 2024 | Q4 2023 | Q1 2023 |
|---|---|---|---|
| Revenue | $235,000 | $251,000 | $4,683,000 |
| Gross Profit | $(154,000) | $(286,000) | $853,000 |
Operating Expenses
Operating expenses for Q1 2024 were reduced by 41% to $769,000, compared to $1.3 million in Q1 2023. This reduction was mainly due to lower personnel costs, decreased marketing expenses, and reduced product development costs.
Net Income/Loss
The company reported a net loss of $917,000 or $(0.11) per share for Q1 2024, compared to a net loss of $431,000 or $(0.05) per share in Q1 2023. The increased net loss is attributed to the significant drop in revenue despite the reduction in operating expenses.
Cash Position and Working Capital
As of March 31, 2024, CEA Industries held cash and cash equivalents totaling $11.6 million, down from $12.5 million on December 31, 2023. Working capital decreased by $800,000 during this period. Importantly, the company remained debt-free at the end of Q1 2024.
Strategic Review and CEO Statement
Tony McDonald, Chairman and CEO of CEA Industries, provided insight into the company’s ongoing strategic review process. “We continue to address the level of our expenses in support of our ongoing strategic review process,” McDonald said. “To demonstrate our commitment to our shareholders and prospects, we further reduced headcount, eliminated product development costs, and brought down business development expenses to help preserve our balance sheet. We will continue to prudently manage our capital as we work through our remaining backlog of projects.”
McDonald also highlighted the company’s exploration of various strategic alternatives. “As previously announced on August 14, 2023, the Board of Directors is actively evaluating multiple strategic alternatives, including a sale, merger, special dividend, or other potential strategic or financial transaction, including a dissolution of the company whereby cash on the balance sheet would be returned to shareholders after adequate provision for outstanding corporate obligations. We will provide updates on material developments that result from this process.”
Update on Review of Strategic Alternatives
CEA Industries’ strategic review remains underway, with the company no longer exclusively partnered with Roth Capital Advisors (“Roth”). The company is actively discussing opportunities with potential partners while continuing to evaluate strategic options, including a sale, merger, or other financial transactions proposed by Roth and other parties. The outcome of this review remains uncertain.
Market Conditions and Bookings
The decline in revenue and net bookings reflects fewer capital expenditures by cannabis operators in the markets served by the company, along with a reduced sales effort. Net bookings in Q1 2024 were $300,000, down from $800,000 in Q1 2023, while the quarter-end backlog was $500,000, compared to $1.9 million in the same period last year.
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CEA Industries Latest News
Reports Financial Results for Q4 and FY 2023 (2024/03/29)
CEA Industries Inc. (NASDAQ: CEAD, CEADW) reported a downturn in revenue and profitability for the fourth quarter and full year ended December 31, 2023. The company’s financial results reflect the impact of reduced capital expenditures within the cannabis industry and a scaled-back sales effort. In the fourth quarter, revenue dropped to $0.3 million from $1.5 million in the same period last year. For the full year, revenue fell to $6.9 million from $11.3 million in 2022. The company managed to decrease its operating expenses by 51% in Q4, leading to a net loss of $1.0 million, an improvement over the previous year’s $1.3 million net loss. Chairman and CEO Tony McDonald highlighted the company’s focus on reducing expenses and preserving capital through a lean cost structure. The company anticipates additional annualized cost savings of approximately $230,000 following recent headcount reductions. As of December 31, 2023, CEA Industries reported $12.5 million in cash and cash equivalents and remains debt-free. The Board of Directors continues to explore strategic alternatives, including potential sales, mergers, or other transactions, to maximize shareholder value.
Reports Third Quarter 2023 Financial Results (2023/11/15)
CEA Industries Inc. (NASDAQ: CEAD, CEADW) reported a challenging Q3 2023 with a decrease in revenue and gross profit. Revenue stood at $0.9 million, down from $5.1 million in the same period in 2022. The company’s gross profit for the quarter was a loss of $0.1 million, compared to a profit of $0.6 million in Q3 2022. Operating expenses decreased by 58% to $0.7 million, and the net loss for the quarter improved slightly to $0.8 million. The company remains debt-free and has $13.3 million in cash and cash equivalents. The Board of Directors actively reviews strategic alternatives, including a potential sale, merger, or other strategic or financial transactions.
CEA Industries Inc. Faces Challenges Amidst Cannabis Market Dynamics, Explores Strategic Alternatives (2023/08/15)
CEA Industries is facing challenges in the cannabis market due to pricing and inflationary pressures. To counter this, the company has introduced cost-cutting measures and is exploring strategic alternatives. In Q2 2023, their revenue dropped to $1.1 million, with a gross profit of $79,000 and operating expenses reduced by 62% to $0.8 million. The company reported cash and cash equivalents of $14.2 million as of June 30, 2023, and remains debt-free.
CEA Industries Q1 2023: Reports Significant Revenue Growth (2023/05/16)
CEA Industries Inc. (NASDAQ: CEAD, CEADW) reported a strong Q1 2023 financial result, with revenue reaching $4.68 million, a 221% quarter-over-quarter and 169% year-over-year increase. The company’s gross profit also increased significantly, reaching $853,000, while operating expenses decreased by 24% to $1.3 million. CEA Industries remains debt-free and confident in its liquidity position to navigate the challenging market environment while securing new contracts in the cannabis and traditional agriculture sectors.
Reports FY 2022: Revenue Decrease (2023/03/29)
CEA Industries Inc. (NASDAQ: CEAD, CEADW), a company operating in the cannabis sector, recently released its financial results for the three and twelve months that ended December 31, 2022. The market environment for cannabis has faced challenges as operators deal with pricing pressure and the inflationary impact on consumer wallets. According to Tony McDonald, Chairman and CEO of CEA Industries, these factors have led to a slowdown in capital expenditures in the sector, resulting in project and buildout delays that negatively affect the company’s business.
To Downsize Its Workforce In Latest Cost-Saving Measure (2023/02/28)
CEA Industries Inc. (NASDAQ: CEAD) has recently announced that it will implement several cost-saving initiatives, including reductions in operating expenses and a reduction in force. These measures are in response to the macroeconomic and supply chain challenges that the company has been facing. One of the main factors behind these challenges is the declining activity in the cannabis market, one of CEA Industries’ primary markets. This decline is due to increasing competition and declining wholesale prices, making it difficult for the company to maintain profitability.
CEA Industries Release Q3 Results (2022/11/15)
CEA Industries (NASDAQ: CEAD) reported a revenue growth of 37% in Q3 of 2022, compared to the same period in 2021. The company’s backlog at the quarter’s end was $6.8 million, generating revenue over the next 18 months. However, the net bookings dropped to $2.2 million in Q3 2022. CEA Industries CEO, Tony McDonald, recognizes the macro climate’s difficulties, including inflationary environments and supply chain headwinds, but plans to execute both organic and inorganic growth initiatives to accelerate growth and profitability in the future.
Signs Contract with Merida Capital Holdings Client (2022/10/05)
CEA Industries announced that its subsidiary, Surna Cultivation Technologies LLC, has signed an incremental contract with a client of its previously announced partner, Merida Capital Holdings. Surna will be providing a suite of HVAC systems for the Connecticut-based client. CEA Industries also announced that its 2022 annual meeting of stockholders has been adjourned to October 6, 2022, at 1:00 PM, Mountain Time.
Photo by CRYSTALWEED cannabis on Unsplash
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