GrowGeneration Corp.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 13, 2024. We caution readers that this Quarterly Report of GrowGeneration Corp. on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. Forward-looking statements generally can be identified through the use of words such as “guidance,” “outlook,” “projected,” “may,” “likely,” “anticipates,” “believes,” “expects,” “estimates,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. Actual events or results may differ materially from those discussed herein. The forward-looking statements contained in this report have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements contained in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements, except as required by federal securities laws. There may be additional risks, uncertainties, and other factors that we do not currently view as material or that are not necessarily known.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 13, 2025. We caution readers that this Quarterly Report of GrowGeneration Corp. on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. Forward-looking statements generally can be identified through the use of words such as “guidance,” “outlook,” “projected,” “may,” “likely,” “anticipates,” “believes,” “expects,” “estimates,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. Actual events or results may differ materially from those discussed herein. The forward-looking statements contained in this report have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements contained in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements, except as required by federal securities laws. There may be additional risks, uncertainties, and other factors that we do not currently view as material or that are not necessarily known. Dollars in tabular format are presented in thousands unless otherwise indicated.

Previous wording

GrowGeneration Corp. (together with all of its direct and indirect wholly owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: its Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.

Current wording

GrowGeneration Corp. (together with all of its direct and indirect wholly owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: our Cultivation and Gardening segment, composed of our hydroponic and organic gardening business; and our Storage Solutions segment, composed of our benching, racking, and storage solutions business.

Previous wording

We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and store operations and other operational expenses within each segment. Selling, general, and administrative expenses, such as administrative and management expenses, salaries, and benefits, share based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to specific segments and are reflected in the enterprise results.

Current wording

We have two operating segments, each its own reportable segment, based on our major lines of business: the Cultivation and Gardening segment and the Storage Solutions segment. We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and store operations and other operational expenses within each segment. Selling, general, and administrative expenses, such as administrative and management expenses, salaries, and benefits, share-based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to specific segments and are reflected in the enterprise results.

Previous wording

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 brand HRG Distribution, we distribute many of our products, including our proprietary products, to customers that are wholesalers, resellers, and retailers in the specialty retail hydroponic and organic gardening industry.

Current wording

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.

Previous wording

We make our products available to growers through a variety of channels, including hydroponic retail locations, a commercial sales teams serving commercial cultivators, an online platform for cultivators at growgeneration.com, and a wholesale business, HRG Distribution, that markets to resellers in both the hydroponic and traditional gardening markets. 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 September 30, 2024.

Current wording

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. 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.

Previous wording

In July 2024, we announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of our Gardening and Cultivation segment such as our proprietary brands, commercial sales, and e-commerce business. These restructuring plans have primarily included product development costs, digital transformation initiatives, reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, in addition to the 7 retail locations closed in the first half of 2024, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

Current wording

In July 2024, we announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of our Cultivation and Gardening segment such as our proprietary brands, commercial sales, and e-commerce business. The restructuring plan primarily included product development costs, digital transformation initiatives, reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, in addition to the 7 retail locations closed in the first half of 2024, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

Previous wording

Overall, we expect to incur a total of approximately $2.4 million in restructuring and restructuring-related costs, including the $2.1 million previously incurred. The remainder of the expected charges primarily relate to corporate operational and administrative contract terminations and other associated costs. We expect that these restructuring activities will be substantially completed by the end of the first quarter of 2025 and will improve gross profit margin and profitability while generating annualized cost savings of approximately $12.0 million.

Current wording

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. 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.

Previous wording

Our restructuring and restructuring related charges consists 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.

Current wording

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:

Previous wording

In addition to the effect on cost of sales shown above related to inventory disposal costs, we estimate we incurred a $0.9 million loss in gross profit due to inventory discounts offered in conjunction with exiting the twelve retail locations. Also 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 an $1.5 million increase to depreciation and amortization expense related to property and equipment in the three and nine months ended September 30, 2024.

Current wording

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.

Previous wording

As of September 30, 2024, the outstanding restructuring liability was $0.3 million pertaining to employee termination benefits and contract terminations costs related to retail location closures, which we expect to pay before the end of the first quarter of 2025. However, certain facilities costs related to closed retail locations for which we are pursuing sublease arrangements will be paid over the remaining terms which extend through 2032 at the latest.

Current wording

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.

Previous wording

GrowGeneration's main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization. As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities.

Current wording

Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization. As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities.

Previous wording

Since our founding in 2014, GrowGeneration has 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 September 30, 2024. GrowGeneration has also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our distribution business, HRG, and our benching, racking, and storage solutions business, MMI. GrowGeneration regularly seeks and evaluates accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates.

Current wording

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. 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.

Previous wording

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 agriculture and golf and country clubs. In March 2024, we announced we had engaged Lake Street Capital to advise and assist in exploring strategic opportunities for our benching, racking, and storage solutions business.

Current wording

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.

Previous wording

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $41.4 million for the three months ended September 30, 2024 compared to $48.0 million for the three months ended September 30, 2023. This decrease in net sales was primarily due to the fiscal 2023 consolidation of 6 retail locations after September 30, 2023 as well as the closure of 19 retail locations to date in fiscal 2024, which include the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan. Additionally, we estimate that inventory sales discounts related to exiting the 12 restructuring retail locations contributed to reduced net sales of $0.9 million in the three months ended September 30, 2024. Same-store sales increased approximately 12.5%, primarily attributable to commercial sales growth, customer retention in markets where there were retail location closures and improvements in our e-commerce site sales volume. Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended September 30, 2024 increased to 23.8% as compared to 19.4% for the three months ended September 30, 2023, largely driven by our strategic initiatives to increase sales volume with our expanded portfolio of proprietary brands and various proprietary product launches. The percentage of Cultivation and Gardening net sales related to consumable products remained relatively flat at 73.3% and 73.5% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

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.

Previous wording

Gross profit was $10.8 million for the three months ended September 30, 2024 compared to $16.2 million for the three months ended September 30, 2023, a decrease of $5.4 million or 33.2%. The decrease in gross profit was primarily related to the Gardening and Cultivation segment, which decreased $5.5 million, or 43.3%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan, including the estimated $0.9 million in inventory sales discounts and the additional $1.0 million of inventory disposal costs incurred in the three months ended September 30, 2024. Gross profit from our Storage Solutions segment increased $0.1 million, or 2.7%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Current wording

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.

Previous wording

Gross profit margin was 21.6% for the three months ended September 30, 2024, a decrease of 750 basis points from a gross profit margin of 29.1% for the three months ended September 30, 2023. The decrease in gross profit margin was largely driven by the Gardening and Cultivation segment, which had a gross profit margin of 17.3% for the three months ended September 30, 2024 as compared to 26.3% for the three months ended September 30, 2023, due to the effects of the strategic restructuring plan, including the inventory disposal costs and inventory sales discounts, reduced inventory discounts from vendors, and continued industry pricing compression on distributed products.

Current wording

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.

Previous wording

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, depreciation and amortization, and impairment loss. Operating expenses were $22.9 million for the three months ended September 30, 2024 and $24.2 million in the three months ended September 30, 2023, a decrease of $1.3 million or 5.4%.

Current wording

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%.

Previous wording

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $10.0 million for the three months ended September 30, 2024, compared to $11.7 million for the three months ended September 30, 2023, a decrease of $1.6 million or 13.9%. The decrease in store operating costs was primarily due to the fiscal 2023 consolidation of 6 retail locations after September 30, 2023 as well as the 19 retail locations closed to date in fiscal 2024, including the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan. This decrease was partially offset by the additional $0.7 million of restructuring costs incurred in the three months ended September 30, 2024 related to exiting those retail locations and the related employee termination benefits.

Current wording

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.

Previous wording

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, remained stable at $12.6 million for each of the three months ended September 30, 2024 and three months ended September 30, 2023. Selling, general, and administrative costs decreased by $0.2 million or 2.3% for the three months ended September 30, 2024 primarily as a result of decreased professional fees and corporate expenses and decreased share-based compensation. This decrease in selling, general, and administrative expense was partially offset by a net $0.3 million increase in depreciation and amortization expense in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, which included increased depreciation and amortization expense related to property and equipment of approximately $0.8 million driven by the accelerated depreciation and amortization for certain capitalized software assets reassessed as part of our restructuring activities and decreased amortization expense of approximately $0.6 million related to intangible assets as a result of intangible asset impairments in fourth quarter of fiscal 2023.

Current wording

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.

Previous wording

Other income (expense) remained relatively flat at approximately $0.6 million and $0.7 million for the three months ended September 30, 2024 and September 30, 2023, respectively.

Current wording

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.

Previous wording

The following non-GAAP financial measures of EBITDA, Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Profit Margin are not in accordance with, or an alternative for, generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, the most directly comparable GAAP financial measures. We believe these non-GAAP financial measures, when used in conjunction with their most directly comparable GAAP financial measures, net income (loss), gross profit, and gross profit margin, provide meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods, identify trends affecting our business, and project future performance. Management uses these non-GAAP financial measures for internal planning and reporting purposes, and we believe that these non-GAAP financial measures may be useful to investors in their assessment of our operating performance, our ability to generate cash, and valuation. In addition, these non-GAAP financial measures address questions routinely received from analysts and investors and, in order to ensure that all investors have access to the same data, we have determined that it is appropriate to make this data available to all investors. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

Current wording

The following non-GAAP financial measures of EBITDA and Adjusted EBITDA are not in accordance with, or an alternative for, generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, the most directly comparable GAAP financial measures. We believe these non-GAAP financial measures, when used in conjunction with their most directly comparable GAAP financial measures, net income (loss), provide meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods, identify trends affecting our business, and project future performance. Management uses these non-GAAP financial measures for internal planning and reporting purposes, and we believe that these non-GAAP financial measures may be useful to investors in their assessment of our operating performance, our ability to generate cash, and valuation. In addition, these non-GAAP financial measures address questions routinely received from analysts and investors and, in order to ensure that all investors have access to the same data, we have determined that it is appropriate to make this data available to all investors. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

Previous wording

As of September 30, 2024, we had working capital of $98.0 million compared to working capital of $116.5 million as of December 31, 2023, a decrease of $18.5 million. The decrease in working capital from December 31, 2023 to September 30, 2024 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 well as reductions in inventory and common stock repurchases.

Current wording

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.

Previous wording

As of September 30, 2024, we had cash, cash equivalents, and marketable securities of $55.2 million. Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital. Our material future cash requirements from contractual and other obligations relate primarily to our operating leases. Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

Current wording

As of March 31, 2025, we had cash, cash equivalents, and marketable securities of $52.6 million. Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital. Our material future cash requirements from contractual and other obligations relate primarily to our operating leases. Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

Previous wording

The following discussion sets forth the major sources and uses of cash for the nine months ended September 30, 2024 and 2023.

Current wording

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

Previous wording

Net cash and cash equivalents used in operating activities for the nine months ended September 30, 2024 was $2.9 million compared to net cash provided by operating activities of $2.8 million for the nine months ended September 30, 2023. The changes in operating cash were primarily driven by the increased net loss as previously discussed.

Current wording

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.

Previous wording

Net cash and cash equivalents provided by investing activities for the nine months ended September 30, 2024 was $6.7 million compared to net cash used by investing activities of $11.2 million for the nine months ended September 30, 2023. Investing activities for the nine months ended September 30, 2024 were primarily attributable to investment of excess cash into marketable securities of $41.9 million, offset by maturity of marketable securities of $50.3 million. We also had purchases of property and equipment of $1.9 million during the nine months ended September 30, 2024. Investing activities for the nine months ended September 30, 2023 were primarily attributable to investment of excess cash into marketable securities of $85.8 million, offset by maturity of marketable securities of $83.4 million, and purchases of property and equipment of $6.0 million, which was primarily related to the implementation and design of a new enterprise resource planning software system.

Current wording

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.

Previous wording

Net cash and cash equivalents used in financing activities for the nine months ended September 30, 2024 was $6.2 million, primarily attributable to common stock repurchased under our share repurchase program. Net cash and cash equivalents used in financing activities for the nine months ended September 30, 2023 was $0.2 million, related primarily to common stock withheld for employee payroll taxes.

Current wording

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.