GRWG - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen. My name is Leonie and I’ll your conference operator today. At this time I would like to welcome everyone to GrowGeneration Corp First Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator to conference like host to Mr. turn would over the your I Salaman, Michael President. ahead. go Please

Michael Salaman

to a Good CFO’s our of Lampert, will and XXth One you. on remarks, and At on scheduled CEO question-and-answer would our With York CFO, call. GrowGeneration be to GrowGeneration Co-Founder name activities, who earnings XXXX session. law Robinson and President of Corp. will to call IR call. like for our After New Monty first I forward in shareholder today's our City. related housekeeping quarter offices time, is Thank afternoon. Cole at participants this My CEO; the of both afternoon. May Darren be bit is that, me everyone there With this move is the & our welcome X:XX our p.m. meeting Michael Salaman, let's Lamirato,

on expect to which full that we website our today's recorded Exchange we in filed Investors those always, risk from Form to filed what familiarize afternoon, say our archived version everyone our statements an that and will and and this could the available with later that call factors call Securities Commission. XX-K, could of materially results results be of themselves you As remind are actual should caution I differ forward-looking want also range here. being I’d make we impact that is the of but our today.

started. things get Let’s

on GrowGeneration, company, you being to a we're publicly the are exchange. trading newly OTCQX of those who For held introduced

and North all of centers America. largest cultivators fastest and chain growing We garden to throughout of types selling growers directly are hydroponic the

types. growth our acquisition across to thousands and company sales, thousands we’ve servicing store over wholly-owned and the we profitably been built all for sales. selling inception, With XXX% reflect initiatives the of growers new accounting, driven logistics, $XXX strategy, company five of XXXX. corporate Since locations. through of an the foundation and tens which specialty of surpass Our growth aggressively Today, of the delivered hyper has growth opening has revenue of year-over-year up we through company purchasing, of from And same XXXX has the have year. that subsidiaries comes infrastructure, million technology now strategies next products

subsidiary that we to expand is is which corporation operations plan First our XXXX. into Canada Corp, GrowGeneration do to a which we in Canada, formed

solely dedicated call Three, Fourth, large team categories farms. projects GrowGeneration Corp Hemp Management and of is securing products solely all a GrowGeneration consisting developed over buildouts Second And vertical that results to generate With our of adding our now all turn lastly, strategy We're to plan advancing completed HeavyGardens.com. end recent we will Darren? sales of various the the through Corp, – products and proprietary of margins ecommerce now who this higher drive to to I a has present locations, commercial into XX a capital which ecommerce of our is Corp the is said, financial dedicated hemp year. is across developing experts. our and a for supply first of product markets. by will division chain Distribution have agricultural developing GrowGen quarter. for Darren, acquisition functionality of

Darren Lampert

the gardening. I'm EBITDA for this and company's financial support build ago and continued forth call earnings shareholders, financial welcome to The We'd years management as this and quarter call. results employees is XX% Thank HeavyGardens.com. first ventilation greenhouse all a almost GrowGeneration up and XXXX to the quarter performance indoor accessories per for the nutrients, Revenue leading staff. and the and share. in of important by of you, positive expanding belief the in an the fourth one were read We $XXX,XXX The company years the largest first advanced all from national Michael transformational. and were is our over at quarter our and to areas. five first Michael. such Good thanking for in afternoon five quarter first it's quarter I our like mission, to hydroponic over set lighting, begin chain marketer areas. We in distributor rapidly company's XXX% United going systems with financial superstore Today, states XX States and the locations XXXX. been eight improved performance growing was milestone a financial stores year-over-year transformational. $X.XX a company almost more and XXXX of improved results Adjusted time in GrowGeneration media, was online because hydroponic

The Our new store million performing in Michigan and same in than revenue stores XX% company $X over openings newly point. approximately with X the increasing both in and up $X.X our California year-over-year Island margins Year-over-year by acquired expected. in store sales better basis were and are and Nevada. much million increased Colorado, all Rhode $XXX,XXX Oklahoma,

acquired newly revenue. in $XXX,XXX HeavyGardens, Our almost ecommerce had new added store,

headed in now in TILT, Harvest, iAnthus services from country. largest some and Cresco the our multistate operators. over revenue a the $X.X of to GrowGeneration Our commercial division few Labs of billion multistate name operators

still a expenses efficiently. volume and our working able as more increase larger bottom our were margins to XXX% reduce purchasing line by Our are corporate percentage by overhead growth, and of we our and by revenue. over With operating to top buying strategies XX% significant in our

net quarter, relatively continues trending quarter our increase corporate revenue being our stays to income QX than income significantly we net will and revenue As are numbers. traditionally first quarter-over-quarter. With to overhead continue higher and increase flat, our strongest

XX.X% revenues XX.X% QX XXXX. The negative Springs, Gross go to to guidance million $X.XX acquisition highlights. are XXXX. to and Revenue open of QX up of to locations XXXX the as of XXXX. $X.X Oklahoma, company have Denver, revenue XX.X% EBITDA for Nevada to Acquired of $XX.X XXX%, million to company were new million. costs, continues Corporate a Net performing of QX $XX March Same-store and XX.X% XXXX I'd Palm share XX% uplisting and $XXX,XXX of sales financial targets increasing the compared to We XX.X% QX Adjusted revenue, XXX%, adjusted equivalents strong were XX% better close QX for QX compared EBITDA XXXX all declined process $X.X for pipeline for of quarter million, larger of over from XX, $XXX,XXX $XXX,XXX QX in compared We first to EBITDA for of XXXX XXXX. a QX for QX income XX% $X.XX adjusted QX our XXXX. stores Company in XXXX. of of Colorado, at XXXX. The than to Reno, million, XXXX set exchange. Maine percentage $XXX,XXX Store from Tulsa, XXXX to for XXXX percentage revenue for was and XXXX. have cash million cash operating for profit XXXX. stores a $XX QX for has QX or few Brewer to XXXX in To-date a XXXX loss declined QX for margin a per for expected. over and for compared $X.X QX. in our California like revenues net of to to overhead

capital XXXX, for over will like With December to in March Lamirato, million at compared the that, the first quarter. XX, call of to million $XX.X I'd working capital our the more financial $XX.X Company had turn to XX, CFO results XXXX. present detail As Monty of of working who our

Monty Lamirato

Thanks Darren.

a bit these give I'll more detail. items, Darren it of Some little went over, but

in stores three for XX, months million comparing sales and XX, XX, decrease compared months the the XXXX, for operating ended months acquired months products XXXX, Gross impacted working December three three Amazon acquisition at XXXX, approximately $XX.X of in XX March approximately March XX, compared quarter. continue for approximately for of that stores January have for March in acquisitions, cost compared XX, QX million, sales. or and the from XX.X% for of up were to months XXXX, growth web profit in the XX, a March XXXX. XXXX, site store revenues XXXX the a the the in new below, revenue. XXX%. after that of resulted months in ended focus capital months XXXX. a the $XX.X which standard ended ended three due in depreciation, application use The we during and three excluding the sales capital capital three opened XXXX. working profit million, amortization million focus of With as increased as for three XXX%, approximately and revenues March in was e-commerce to goods XX, addition and new XXXX continued acquired an of revenue the mid-September of were ended $X.X revenue our representing new stores three of XX.X% XX% ended as stores Four XXXX. XXXX, XXX%, XXXX, to in The had Same development ended March XX, the XX.X% added for for three XX, X, in compared the approximately XX.X% which So of current market each XXX% the increase decline to a on million, three XXXX XXXX three to new to XXXX. or costs leases ended sheet, for XX, the overhead primarily operating due million cash or of ended XXXX XXXX new in balance a Corporate QX store and XXXX the to March costs sold higher months in and of related to $X.X three lower regards sales March XXXX for net were the XX, e-commerce to for for months percentage compensation, continues of the Store to store positively March we ended from XX XXXX, of during with the $X.X of and The percentage acquisition ended operating December XX, on increase of equivalents approximately or the million March operating XXXX of of ended opened million Corporate as as as to proprietary XX, the percentage million noted two, March working to one, XXXX balance online reduction XX XX, new contributed and increase XXXX, million. the and XXXX XX, approximately Cost costs larger XXX%. Store and primarily due the The of site in was eight site three the in $X.X March compared XX, contributed which approximately million approximately XXXX, $X.X $X.X Gross million XX.X% months to stores months for and as being volume. $X.X of was new due operating for liabilities March XX, of new ended approximately was to March opportunities quarter of the QX a ended ended had March primarily of March to XX.X% December of a $X.X XXXX. At million, X.X% percentage to was approximately Company cash approximately XX, revenues three XX, the ended we exist size to $XX.X new million. the XXXX. months sales new percentage the the to the to XX% by increase $X.X to costs currently of XX, accounting times $X.X sales QX declined months decrease sold ended March XXXX months goods sheet. based compared overhead, a XX% approximately their of during cash XXXX share to; $X.X XXXX. million a XX, compared March $X.X we various to $X.X revenue March the was revenues non-cash revenue million e-commerce markets quarter quarter increased three

the we fund existing let for of call to sufficient As months. of cash send cash believe date filing, equivalents the and to that XX you. are existing next Darren, operations this back me the

Darren Lampert

accessories greenhouse supply built for systems, you, hydroponic chain marketer lighting Thank media, Monty. eight GrowGeneration GrowGeneration is ventilation and distributor and has of indoor states. and with locations XX a advanced the Today gardening. nutrients, in growing and leading

share Our XXX% up revenue. operating point, XXXX, versus margins company up XXXX and EBITDA $X.XX per in expenses improved his financial a percentage the XXX%, first a were positive performance XX% as adjusted was quarter one quarter, corporate down significantly revenues down first overhead of with

our Second to look our margin We partners. million project quarter expansion is for EBITDA. adjusting and continued Company of traditionally the countries, our management XXXX our strong serviced continues strongest shareholders, quarter growers $XX multi-state of $X.XX sharing as of process We're share to forward million off with thousands guidance larger to successes adjusted up a the team $X.XX XXXX. largest growth in to the our is to trending in We of it in uplistening The and $XX operators. exchange. several and We and a revenue year.

questions call up the open will We for now Operator.

Operator

ahead. Alan Brochstein XXX Investor. go Instructions] [Operator please from from Your you. is Alan, first question Thank

Alan Brochstein

Hey see shared guys to the exciting quarter. very financials you congratulations, this

Darren Lampert

Thank you.

Monty Lamirato

Thank you.

Alan Brochstein

I had, first sharing of clients. all, appreciate just some you guys of I your

first I that. the and one you I you think I could heard Holdings, time And that's heard mentioned if I've Cresco iAnthus, just… think TILT another

Darren Lampert

Harvest.

Alan Brochstein

Got Thank Harvest. you. it.

the of was noticed I one inventory So build. things

seen that you enough guys ways instance. your into believe have potential equity? you Are been some to cash point? of you selling and you I've you year. markets the other the financing forms this any your open other some mode, capital But I to peers’ finding M&A at the there are besides guys current has raise debt rest for of of clearly some handle for to operations guys the You in used cash understand cash

Darren Lampert

Yes. We're or But for to our again, month enough sheet once types we additional capital next currently funding – always finance Currently we're have cash we'll be acquisitions fund balance of exploring acquisitions. instruments over financial types acquisitions. of the two. looking on accretive all to that for doing

Alan Brochstein

pretty Oklahoma these is, talk Michigan, wondering to runway immediately. question these you not the in entered? next job have or where about my could and went big be to some you substantive then whether much in new or some And like that guys of from other emerge seeing competitors terms I'm these markets in zero just new markets guys you're of Okay. fantastic markets something of you how if

Michael Salaman

our were to we issued, And because of they've targeted we've company, GrowGeneration commercial Alan licenses we first And favorable very the that, The to list brand, And markets. these cultivators. customers service nice number to us. laws the and been of and strategy be of the growers, do a market. of has little laws growers as in our captured into went pertaining and coming a with ability Oklahoma mover with our the marketing have We to were staff provides passed. these and that they very which

lot Michigan in those potential complete these of it's one-stop well. entered we've And mouth a another So providing market as of and mainly for to our strategy a an a the see that for markets as pass, for put growers. provide word XXXX solution laws be growth. see the into in shopping licensed operators we solution early markets And that commercial and and we large mover other commercial it's to working. markets the emerging is those we're GrowGeneration will operation these constantly one-stop identifying

Darren Lampert

I is And Darren. think Yes. – this

good way a GrowGeneration. think to at I look

to what all consolidator the up seeing you're now is be we a mover. markets. also mover And new in first more markets. California in are quarter and opening a where markets numbers And in mature and the new Colorado a GrowGeneration first our of you're certainly markets will We first right resurgence seeing

in markets of the right mature the perfect that you're So seeing leading seeing lot you're now. a we're consolidation storm, really

in the MSOs more funded in the a a can seeing, GrowGen our now, larger, more seeing do its large can certainly these country. new operate store seeing and starting you're right experiences lot doors. XX eight that and handle closing get day large over at team also in that of wealth the So a have smaller And getting and opening lead over right period, cultivators open And companies states. in markets. much the our in of to efficient anywhere companies you're their a we're you're the more it stores some within mature states we through And take

Alan Brochstein

in that’s were Great. vertical? January, the guys in I sure you excited and playing with And out. hemp in you saw a us about you progress Miami about your then I’m share very opportunity Can that little bit

Darren Lampert

Did you say hemp?

Alan Brochstein

Hemp.

Darren Lampert

positioned get plant it's is month on in our cultivators channel knowledge and doing create and a is stock just to for right a and other space that product I get to together products put on that the something portfolio. supply the we already to cannabis that the work XX,XXX only just goal a or on to Alan, take going our large the a available side thing and we for now. and have and Hemp, and we've is very mean, machinery ability supply farming we're defining, the our agricultural the the believe work like larger. create we formed would And and turnkey for so. right GrowGeneration so We're be will today want certainly to that we cultivation in its market. to about on time investigating basis into learning, the farms. products putting And We're chain we're division that we're its hemp complimentary and like well of data We same the acreage hemp done the next the the is do cannabis also the that market. there's there's program also based

are we company. vertical excited and that can bring a accretive that extremely something work market revenue the progress it's So that's to the in about

Alan Brochstein

Great.

didn't from… even success be all of you to the QX much in include just anything clear, just So had

Darren Lampert

started mean, little. fulfill some as percentage of Kentucky – to in but a based of Colorado some but we've very market, very, I the North business. and the farms and small farms in Very, overall very Carolina the our

Alan Brochstein

back Okay. the queue. in my questions. Thank I’ll you jump taking for

Michael Salaman

Alan. you, Thank

Darren Lampert

you, Thank Alan.

Operator

you. Thank

from Your Global next from Aaron, ahead. Grey Partners. Aaron Alliance is please go question

Aaron Grey

congrats question on and the the for Thanks guys. quarter

Michael Salaman

Thanks Aaron.

Darren Lampert

you. Thank

Aaron Grey

So quickly kind Oklahoma expectations? just states of top I well. know of on can the came very about talk ahead guidance, we in line did raised which

going the to you're just guess and saw I both outperformance it you XQ XQ? you raise also drove the or that more forward that is the that outside So was line guidance then expecting guys top of for part of in what and raise embedded kind what

Darren Lampert

Well, Michigan are both. tremendous that all our growth it seeing that and about opened. was seeing bought Colorado and a operation strong run We to stores stores seeing year one new Island. just state. store stores markets the that on million. rate It's now. a tremendous, little right we're $X.X our performance states We're But we're California in, – only also in doing of we're purchased ago three a old mature in. more tremendous also in Oklahoma that $X.X and not Aaron, some our resurgence of we're of we a in Those stores. we're growth And million $X we've million was three seeing Rhode

starting everywhere, starting stores seeing we're So We're growth also we're starting our to traction. new some stores to store we're work, online old I gain is to our seeing seeing mean, our work. seeing

And our into So weaknesses, quarter strongest within was straight right around. it basically all. the sort at know we're was We quarter seasonally first the going of now. strong, quarter second

into And wonderfully. May right tracking now. are we're sales month first Our

the work operation a our to have which do obtain, starting they seems grow this dedicated, to is the all new fairly And on for company its now. to at of large the that that multistate We continuing itself. would that they're right XX managers now is thing operators, really the store And and formed accounts is is commercial certainly there Aaron, add, legs of firing other get The be year, level. everything we all that I those growing. business side is support on that see one the side accounts. individuals division, to the that commercial division So business, on cylinders

do didn't not come have nice that's – is have, enabling a the talk up the one which last online the That's by to able and part year. business growers, and customers to of They way. accessing our part e-commerce delivered. it's that's or long-term the our they business to to like love growing. being only the into another of And of locations one that they professional it of pick orders love convenience Our also certainly strategy we have their to to but of it of would

technology as we customers. going evolved is acquisition that our, that's optionality for being our part be of made, to from So embedded that our

are we're Consolidation, I and it multistate coming and GrowGeneration to continuing. everything. a it's challenging So and it's level level. has where a to regional growth, these of Darren think it's business really, we very performing And expansion, now a said, us national large that as attract we're scaled see manage operators, and on combination because they're can which executing,

Aaron Grey

made And little wanted that a progress. we've of to All MSO just of dig I on right, relationships, a lot – bit those great. deeper kind

working to and stage that states? kind what can come you that Or players kind how been talk one of to penetrate – for of kind you you the also I provider them? board? that multiple to you working a of level of faster just hope current with touched are in I what have in of, would in terms the the you be within with of just kind kind knowledge you working evolves then think you has them And first but on it with are relationships large with? evolving MSOs start you're state within have before, and guess, think? expand earlier, also guess, I kind about of players of you those effort you and, then than talked Do see could kind you on those that Just about

Michael Salaman

we the in multiple markets. – starts with works we're start companies a get experience, second expand that into we then tertiary you it. It in our It’s locations. in way mentioned, And Yes. described the a All to we MSOs, region and the a working market. exactly then and

So multiple within within locations. of now eight, because individual those continue nine, different the organic MSOs are those XX business MSOs, locations. Most is organizations. in there's these in MSO in are growth, the all handful growth, a company, with them Right

as strategy, have So through an organically within multiple as they working. the facilities. MSO we working the portfolio, because cultivation company. continue And to individual serve expanding their grows It's we're for certainly it's

Aaron Grey

All I right, on. all mine. have great. Best all That's I That's have on luck.

Darren Lampert

you. Thank

Michael Salaman

Thank you, Aaron.

Aaron Grey

you. Thank

Operator

[Operator Duan and Instructions] Your next from question please from R.F. Lafferty Roger, ahead. go is Company. Roger

Roger Duan

Hi, Darren. Hi Michael, congrats on the quarter.

Darren Lampert

Thank you, Roger.

Michael Salaman

Thank you, Roger.

Roger Duan

Hey, so of questions. just couple quick – quick

First about of what you to for private is margin forward? are of is all, to how's can is – and do talk going going A going little progressing? where quarter it think and business, your second particular this label a bit it – expansion this sort contributed your

Michael Salaman

business, private a is XX perspective. was in company last, strategy made benefit product that with trademarks, we we've and from buy the buying the direct, moved just increase. stores. the driving more of get to private we've starting ability power, within that to – our deals, recently the better our the the XX on now just which combination margin our And It's about margin days label It up based and what's into different some margin and our Roger, acquisition picked inventory.

to to be attached that IP into come we of that's have that the it. market, addition, that's And but a products developing the been different labeled develop different owned. something will around private company will types has work In yet and to products is are property in process working that intellectual

Roger Duan

Right.

a are states those it label So right in is test still of in the now? Or private regional sort are the, like products, all run?

Michael Salaman

still as being developed, market It’s of they're in today. not the

Roger Duan

Okay.

Okay. problem. No

that they with your operators, of talked multistate pressure powers in bigger for – and – revenue, you be their down your of price become for percentage percentage – of sort you products were impact it of have a a bigger it your sense? multistate you – guys if will as how buying there will as know, second, – the problem purchase your So margin, how will purchasing about as makes relationship as they a terms they usually as

Michael Salaman

not margins right down our Roger, again, are up going now.

no and we're again, from on an stores online at seeing look standpoint. a We So, store. the have GrowGen MSOs pressure XX margin we

as the and straight of customers So with the you're as go to are and the starts tomatoes. margins, individual MSOs seeing at bottom that growing, a which blend lettuce

So, been our have margins right now never stronger.

seeing quarter margin I was our continuing quarter. into was – and a first think, our the we're second strongest quarter

Roger Duan

Okay, great.

for it me. that's think I

Michael Salaman

Thank Roger. you,

Operator

you. Please There proceed. are this questions further Thank time. at no

Darren Lampert

Well. We thank you. want and for we're and a to shareholders, and to Everyone afternoon great everyone the second our taking thank our shortly. management our we quarter time about today, talk team, appreciate have excited

Michael Salaman

Thank you.

Operator

conference We Ladies for you and call please lines. disconnect gentlemen, this concludes today. your you and thank participating ask your that

GrowGeneration (GRWG) 7 May 192019 Q1 Earnings call transcript