Executive Summary

Q2 2024 filing delayed due to a restatement tied to deferred tax liability accounting; management furnished only preliminary results and expects no material impact on revenue, Adjusted EBITDA, or cash flows from the restatement .
Preliminary Q2 revenue is “at least $17.5M,” up ~13% sequentially; management said Q3-to-date performance had “accelerated further,” implying stronger H2 execution despite filing delays .
Prior quarter (Q1 2024) showed operational improvement: revenue $15.5M, gross margin 20%, and Adjusted EBITDA of -$0.3M; backlog stood at ~$99M as of March 31, 2024 .
FY24 guidance (revenue >$84M and positive Adjusted EBITDA) was reaffirmed on April 30; the Aug. 14 8-K did not update guidance amid the re-audit/restatement process .
Stock reaction catalysts: restatement risk and timing of amended filings versus evidence of sequential revenue acceleration and H2 strength; watch for equipment/backlog inflection and regulatory tailwinds discussed by management .

What Went Well and What Went Wrong

What Went Well

Sequential growth: Q2 2024 preliminary revenue ≥$17.5M, +13% q/q, indicating momentum despite the delayed 10-Q .
Margin/opex execution in Q1: gross margin expanded to 20%; G&A down $2.8M y/y; Adjusted EBITDA improved to -$0.3M, reflecting cost actions and service productivity gains .
Management tone: “Revenues in the second quarter are expected to exceed $17.5 million…our third quarter-to-date performance has accelerated further, giving us confidence that we will generate stronger results in the second half of the year” — Brad Nattrass, CEO .

What Went Wrong

Restatement and non-reliance: Audit Committee determined FY22, FY23, and Q1’24 financials should not be relied upon, driving a Q2 10-Q delay and elevating governance/audit risk .
Prior quarter headwinds linger in comps: Q4 2023 saw gross margin compression from a project cost revision and multiple project delays, depressing the baseline for sequential improvement .
Equipment revenues remain depressed vs. history; equipment backlog was just ~$1M at Q1’24; liquidity tight with $0.7M cash and $2.0M drawn on the $10M facility (as of Mar 31, 2024) .

Financial Results

Note: Q2 2024 is preliminary (revenue only) pending restated filings; no Q2 2024 EPS or margin were furnished.

Metric	Q2 2023	Q4 2023	Q1 2024	Q2 2024 (prelim)
Revenue ($USD Millions)	$18.8	$15.0	$15.5	$17.5+
Gross Margin %	15%	11%	20%	N/A
GAAP Diluted EPS	$(0.50)	$(0.40)	$(0.18)	N/A
Adjusted EBITDA ($USD Millions)	$(2.0)	$(3.0)	$(0.3)	N/A

Segment revenue mix (where available):

Revenue Mix ($USD Millions)	Q2 2023	Q1 2024
Equipment Systems	$4.62	$2.51
Services	$3.03	$3.13
Construction Design-Build	$11.05	$9.83
Other	$0.13	$0.08
Total	$18.84	$15.54

KPIs and balance sheet indicators:

KPI	Dec 31, 2023	Mar 31, 2024
Backlog ($USD Millions)	$110	$99
Backlog Mix – CEA (%)	~70%	76%
Backlog – Services ($M)	$7	$5
Backlog – Equipment ($M)	$1	$1
Cash ($USD Millions)	$1.11	$0.69
Revolver Drawn ($USD Millions)	$2.50	$2.00

Consensus vs actual (availability note):

Metric	Period	Consensus (S&P Global)	Actual/Prelim
Revenue	Q2 2024	Unavailable (not retrieved due to S&P Global request limit)	$17.5M+ prelim
EPS	Q2 2024	Unavailable (not retrieved due to S&P Global request limit)	N/A

Consensus data unavailable at the time of analysis due to S&P Global API limit.

Guidance Changes

Metric	Period	Previous Guidance	Current Status	Change
Consolidated Revenue	FY 2024	>$84M (3/27/24)	Reaffirmed on 4/30/24	Maintained
Adjusted EBITDA	FY 2024	Positive (3/27/24)	Reaffirmed on 4/30/24	Maintained
Q2 Revenue	Q2 2024	n/a	Preliminary ≥$17.5M (8/14/24)	New preliminary disclosure
FY 2024 Update at Q2	FY 2024	>$84M & Positive Adj. EBITDA (as of 4/30/24)	No update in 8/14 8-K; company focused on re-audit/restatement timing	No update provided

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2023 and Q1 2024)	Current Period (Q2 2024)	Trend
Cannabis rescheduling/SAFER Banking	Management highlighted DEA rescheduling as a major potential catalyst; SAFE/SAFER could unlock capital; Florida adult-use on ballot seen as significant	No Q2 call; CEO reiterated momentum and stronger H2 in 8-K commentary	Cautious optimism → continued optimism
Backlog and mix	Backlog $110M at YE23 (70% CEA); $99M at Q1 with 76% CEA; commercial diversification ongoing	No Q2 backlog disclosed; early indicators to watch include services and equipment backlog	Mixed: backlog down q/q in Q1; watch for reacceleration
Margins/opex	Q4 margins hit by project cost revision; Q1 services productivity drove 20% GM; ~$8M annualized G&A reduction driving breakeven lower	No Q2 margins reported; management expects stronger H2	Improving sequential margin trajectory but unconfirmed for Q2
Equipment cycle	Equipment revenue depressed; equipment backlog only ~$1M at Q1; seen as early-cycle indicator if cannabis CapEx returns	No Q2 detail; mgmt sees early signs post-positive regulatory headlines	Early green shoots when sector reaccelerates
Europe	Rightsized; demand subdued; selective engagement (Germany/Portugal/NL)	No update in Q2 filing	Stable, low near-term contribution

Management Commentary

“Revenues in the second quarter are expected to exceed $17.5 million…our third quarter-to-date performance has accelerated further, giving us confidence that we will generate stronger results in the second half of the year” — Brad Nattrass, CEO (Aug 14, 2024) .
“Our performance in the first quarter reflected solid bottom-line improvement…targeted actions to reduce our operating expenses…we remain focused on…recapture sustained positive Adjusted EBITDA in the near-term” — Brad Nattrass (Apr 30, 2024) .
“We are maintaining our guidance to recognize more than $84 million in revenue and to generate positive adjusted EBITDA” — Brad Nattrass (Q1 2024 call) .
“Backlog remained strong at $99 million” — Richard Akright, CFO (Q1 2024 call) .

Q&A Highlights

Rescheduling and demand timing: Management expects early indicators in services and equipment backlog; cited 2021 equipment revenue of $56M vs $13M in 2023 and flagged watchpoints for Q2 backlog trends .
Guidance cadence: Company aims to under-promise/over-deliver; sequential improvement expected with lowered breakeven from G&A optimization .
Margin sustainability: Q1 construction margins benefited from higher-margin projects and structural improvements (ERP, controls); Q4’s project cost issue viewed as legacy and largely behind them .
Backlog composition: ~76% CEA and 24% commercial at 3/31/24; commercial demand steady but contract signature timing can extend lead times .
Europe: Rightsized cost structure; limited near-term growth, selective engagements continue .

Estimates Context

S&P Global consensus for Q2 2024 revenue/EPS was unavailable at the time of analysis due to API request limits; the company also did not furnish full Q2 financials pending restated filings .
The absence of EPS/margin data and the non-reliance determination for prior periods suggest Street models may delay material revisions until amended 10-K/10-Q are filed; preliminary $17.5M+ revenue implies sequential upside vs Q1 but lacks the full P&L context for EPS/margin updates .

Key Takeaways for Investors

Filing risk is the near-term overhang: non-reliance on FY22, FY23 and Q1’24, a re-audit in process, and a delayed Q2 10-Q create uncertainty on timing and controls, even as management expects no material impact to revenue/Adj. EBITDA/cash flows from the accounting fix .
Execution momentum emerging: sequential Q2 revenue growth (+13% q/q prelim) and commentary of stronger Q3-to-date indicate operational traction despite audit headwinds; watch for formal confirmation in amended filings .
Margin/opex work matters: Q1 showed 20% GM and improved Adjusted EBITDA from cost actions and services productivity; sustained benefits depend on mix (construction vs equipment/services) and project execution .
Backlog trajectory over the next prints is key: backlog slipped from $110M (YE23) to $99M (Q1), with 76% CEA; management views services/equipment backlog as early indicators of a cannabis CapEx upcycle .
Regulatory catalysts could reaccelerate equipment and CEA demand (DEA rescheduling, state-level wins, eventual banking reform), but timing remains uncertain; no such benefits embedded in prior guidance per management .
Liquidity is tight but supported by revolver: cash $0.69M and $2.0M revolver draw at 3/31/24; disciplined working capital and project billing remain important while filings are delayed .
Trading setup: headline volatility around restatement timing vs. improving sequential fundamentals; confirmation via amended 10-K/10-Q and any backlog/equipment inflection would be constructive .

Appendix: Source Documents

Q2 2024 8-K (restatement and preliminary revenue): Aug 14, 2024
Q1 2024 8-K earnings release: Apr 30, 2024
Q1 2024 earnings call transcript: Apr 30, 2024 –
Q4 2023 8-K earnings release: Mar 27, 2024 –
Q4 2023 earnings call transcript: Mar 27, 2024 –
Q2 2023 8-K and call for historical trend: Aug 14, 2023 – –

urban-gro, Inc. (UGRO)·Q2 2024 Earnings Summary