RESTRUCTURING

3 Months Ended

Mar. 31, 2025

Restructuring and Related Activities [Abstract]

14. RESTRUCTURING

On July 22, 2024, the Company announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of its Cultivation and Gardening segment such as its proprietary brands, commercial sales, and e-commerce business. The restructuring plan primarily included reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

The Company's 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.

Since the restructuring activities were announced in July 2024, the Company incurred aggregate restructuring and restructuring-related costs of $3.5 million, of which $1.1 million were incurred during the three months ended March 31, 2025 and are presented on the Condensed Consolidated Statements of Operations as follows:



	Restructuring
Cultivation and Gardening segment:


Store operations and other operational expenses (1)	765
Segment operating loss	(765)
Corporate expenses:
Selling, general, and administrative (2)	376


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

In conjunction with the Company's restructuring activities related to operational and administrative improvements, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in an $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. Additionally, certain facilities costs or contract termination costs related to closed retail locations for which the Company is pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032.

The liabilities associated with restructuring costs are included in Accrued liabilities and Payroll and payroll tax liabilities on the Condensed Consolidated Balance Sheets. Activities related to liabilities incurred under the restructuring plan were as follows:


	Retail Location Closures		Termination Benefits		Total
Balance as of January 1, 2025	$	115	$	9	$	124
Additions	765		—		765
Payments and other adjustments	(880)		(9)		(889)
Balance as of March 31, 2025	$	—	$	—	$	—

Overall, the Company has incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including the $1.1 million incurred in the three months ended March 31, 2025. The Company has substantially completed its restructuring activities as of March 31, 2025 and does not expect to incur significant additional restructuring and restructuring-related costs in future periods.

GrowGeneration Corp. 10-Q