CEA Industries Inc. Reports First Quarter 2023 Results

- Q1 Revenue Increases to $4.7 Million -
- Net Bookings Return to Modest QoQ Growth; Industry Headwinds Persist -

Louisville, Colorado, May 15, 2023 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”), is reporting results for the three months ended March 31, 2023.

“Q1 results reflect the completion of some previously delayed projects as well as the successful implementation of our cost cutting initiatives,” said Tony McDonald, Chairman and CEO of CEA Industries. “We experienced double-digit growth in revenue and material operating expense savings. Although these results are a step in the right direction, we recognize the market continues to combat pricing and inflationary pressures affecting both consumers and operators.

“Moving forward, our primary focus will remain on running a lean operation while securing new contract wins both within the cannabis and traditional agriculture verticals. Given the challenged environment over the past year, our net bookings have been limited in recent quarters, which will have an adverse effect on future revenue. However, with our strong liquidity position and prudent approach to capital allocation, we believe we are well-equipped to navigate the current environment and deliver value to both our customers and shareholders.”

First Quarter 2023 Financial Summary (in $ thousands, excl. margin items):

 Q1 2023Q4 2022Q1 2022% QoQ% YoY
Revenue$4,683 $1,461 $1,744 221%169%
Gross Profit$853 $151 $91 465%837%
Gross Margin 18.2% 10.3% 5.2%790bps1300bps
Operating Expenses$1,299 $1,434 $1,702 -9%-24%
Net Income/(Loss)$(431)$(1,272)$(1,423)NA    NA    

First Quarter 2023 Financial Results

Revenue in the first quarter of 2023 increased more than 2x to $4.7 million compared to $1.7 million for the same period in 2022. The increase was primarily attributed to improvements in the Company’s supply chain and deployment of project work as the Company worked through delayed projects from prior periods.

Net bookings in the first quarter of 2023 were $0.8 million compared to $2.1 million in the year-ago period. The Company’s quarter-end backlog was $1.9 million compared to $11.2 million for the same period in 2022. The decrease in the Company’s net bookings and backlog for the first quarter of 2023 was primarily driven by fewer capital projects and expenditures by cannabis operators.

Gross profit in the first quarter of 2023 increased to $0.9 million compared to $0.1 million for the same period in 2022. Gross margin increased significantly to 18.2% compared to 5.2% in the year-ago period. The increase in gross margin was primarily driven by higher revenue and a decrease in fixed costs as a percentage of revenue, which include the cost of services, engineering, manufacturing and project management.

Operating expenses in the first quarter of 2023 decreased 24% to $1.3 million compared to $1.7 million for the same period in 2022. The decrease was primarily driven by lower product development expenses, as well as decreased personnel and marketing costs.

Net loss in the first quarter of 2023 improved to $0.4 million or $(0.05) per share, compared to a net loss of $1.4 million or $(0.41) per share for the same period in 2022.

Cash and cash equivalents were $15.9 million on March 31, 2023, compared to $18.6 million on December 31, 2022, while working capital decreased by $0.2 million during this period. At March 31, 2023, the Company remained debt free.

Conference Call

CEA management will host a conference call today to discuss its financial and operating results, followed by a question-and-answer session.

Date: Monday, May 15, 2023
Time: 4:15 p.m. ET
Dial: 1-973-528-0008
Access Code: 704185
Webcast URL: https://www.webcaster4.com/Webcast/Page/2893/48284

Interested parties may submit questions to the Company prior to the call by emailing info@ceaindustries.com. For those unable to participate in the conference call at that time, a replay will be available for two weeks in the Investors section of the Company’s website at www.ceaindustries.com beginning on May 15, 2023, at 5:15 p.m. ET.

About CEA Industries Inc.

CEA Industries Inc. (www.ceaindustries.com) is home to industry leaders that provide a suite of complementary and adjacent offerings to the controlled environment agriculture industry. The Company’s comprehensive solutions, when aligned with industry operators’ product and sales initiatives, support the development of the global ecosystem for indoor cultivation.

Headquartered in Louisville, Colorado, CEA Industries knows that growth is a team sport. Through future partnerships and mergers and acquisitions, both financial and strategic, CEA Industries will continue its pursuit of companies and products that bring accretive value to its customers.

Forward Looking Statements

This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect our current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release, including the factors set forth in “Risk Factors” set forth in our annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”), and subsequent filings with the SEC. Please refer to our SEC filings for a more detailed discussion of the risks and uncertainties associated with our business, including but not limited to the risks and uncertainties associated with our business prospects and the prospects of our existing and prospective customers; the inherent uncertainty of product development; regulatory, legislative and judicial developments, especially those related to changes in, and the enforcement of, cannabis laws; increasing competitive pressures in our industry; and relationships with our customers and suppliers. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. The reference to CEA’s website has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release.

Non-GAAP Financial Measures

To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings and backlog, as well as other significant non-cash expenses such as stock-based compensation and depreciation expenses. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

Investor Contact:

Sean Mansouri, CFA
Elevate IR
(720) 330-2829

CEA Industries Inc.
Condensed Consolidated Balance Sheets
(in US Dollars except share numbers)

 March 31, December 31,
  2023   2022 
Current Assets   
Cash and cash equivalents$15,948,077  $18,637,114 
Accounts receivable, net 61,774   2,649 
Inventory, net 441,133   348,411 
Prepaid expenses and other 471,137   1,489,921 
Total Current Assets 16,922,121   20,478,095 
Noncurrent Assets   
Property and equipment, net 60,713   68,513 
Intangible assets, net 1,830   1,830 
Deposits 14,747   14,747 
Operating lease right-of-use asset 436,549   462,874 
Total Noncurrent Assets 513,839   547,964 
TOTAL ASSETS$17,435,960  $21,026,059 
Current Liabilities   
Accounts payable and accrued liabilities$1,164,134  $1,207,258 
Deferred revenue 1,102,601   4,338,570 
Accrued equity compensation -   89,970 
Current portion of operating lease liability 120,245   118,235 
Total Current Liabilities 2,386,980   5,754,033 
Noncurrent Liabilities   
Operating lease liability, net of current portion 348,179   376,851 
Total Noncurrent Liabilities 348,179   376,851 
TOTAL LIABILITIES 2,735,159   6,130,884 
Commitments and Contingencies (Note 6) -   - 
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding -   - 
Common stock, $0.00001 par value; 200,000,000 authorized; 8,076,372 and 7,953,974 shares issued and outstanding, respectively 81   80 
Additional paid in capital 49,410,899   49,173,836 
Accumulated deficit (34,710,179)  (34,278,741)
Total Shareholders’ Equity 14,700,801   14,895,175 

CEA Industries Inc.
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)

 For the Three Months Ended March 31,
  2023   2022 
Revenue, net$4,682,573  $1,744,427 
Cost of revenue 3,829,297   1,653,919 
Gross profit 853,276   90,508 
Operating expenses:   
Advertising and marketing expenses 202,323   251,015 
Product development costs 76,413   138,918 
Selling, general and administrative expenses 1,020,702   1,311,777 
Total operating expenses 1,299,438   1,701,710 
Operating loss (446,162)  (1,611,202)
Other income (expense):   
Other income (expense), net 5,704   185,000 
Interest income (expense), net 9,020   3,260 
Total other income (expense) 14,724   188,260 
Loss before provision for income taxes (431,438)  (1,422,942)
Income taxes -   - 
Net loss$(431,438) $(1,422,942)
Convertible preferred series B stock dividends  -    (35,984)
Deemed dividend on convertible preferred series B stock on down round -   (439,999)
Net loss available to common shareholders$(431,438) $(1,898,925)
Loss per common share – basic and diluted$(0.05) $(0.41)
Weighted average number of common shares outstanding, basic and diluted 8,071,731   4,622,427 

CEA Industries Inc.
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)

 For the Three Months Ended March 31,
  2023   2022 
Cash Flows From Operating Activities:   
Net loss$(431,438) $(1,422,942)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Depreciation and intangible asset amortization expense 7,500   8,556 
Share-based compensation 147,094   92,517 
Provision for doubtful accounts (1,705)  (22,168)
Provision for excess and obsolete inventory 33,638   3,676 
Loss on disposal of assets 100   5,499 
Amortization of operating lease ROU asset 26,325   25,433 
Changes in operating assets and liabilities:   
Accounts receivable (57,420)  10,610 
Inventory (126,360)  (631,269)
Prepaid expenses and other 1,018,785   (551,261)
Accounts payable and accrued liabilities (43,124)  43,438 
Deferred revenue (3,235,970)  2,645,579 
Operating lease liability, net (26,662)  (14,811)
Net cash provided by (used in) operating activities (2,689,237)  192,857 
Cash Flows From Investing Activities   
Purchases of property and equipment -   (13,948)
Proceeds from the sale of property and equipment 200   - 
Net cash provided by (used in) investing activities 200   (13,948)
Cash Flows From Financing Activities   
Payment of dividends on series B preferred stock -   (35,984)
Redemption of series B preferred stock -   (1,980,000)
Net cash proceeds on sale of common stock and warrants, net of expenses -   21,711,131 
Net cash provided by financing activities -   19,695,147 
Net change in cash and cash equivalents (2,689,037)  19,874,056 
Cash and cash equivalents, beginning of period 18,637,114   2,159,608 
Cash and cash equivalents, end of period$15,948,077  $22,033,664 
Supplemental cash flow information:   
Interest paid$-  $- 
Income taxes paid$-  $- 
Non-cash investing and financing activities:   
Conversion of series B preferred stock -  $1,980,000 
Deemed dividend on series B preferred stock arising on down round -  $439,999 
Options issued for accrued equity compensation liability$89,970  $-