GRWG - Earnings call transcript Q3 2021

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to GrowGeneration Corp, 2021, Third Quarter Conference Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for analyst questions.

question a have you [Operators Instructions]. If

was would This conference you and the earnings this call like now John I November to Instructions]. [operators the conference accompanying release Investor question, over your press this is turn XXXX, morning. will withdraw XX, If issued Evans, being Relations. to today, recorded

John Evans

our CEO, morning. would like this Generations Salaman, earnings XXXX quarter With President, I Lasher, to us Grow and and will session. Good our management conference is an morning Co-Founder, Co-Founder and Lampert, CFO. Darren third Q&A analyst Michael remarks, welcome everyone Chairman be call. Jeff to there After

materially to caution intend, say here. from As expect make always, identified to statements Such statements we you can this we terms expect, actual morning, believe, be such our as want differ what but that by and we forward-looking could may. results

we differ obligation results those make You forward-looking forward-looking statements. statements forward-looking should Actual today. And not reliance on we not materially from place update any do may undertake undue statements. to any

with will in Lampert. I call as the later on differ Form analysis now and about recorded our XX-Q also management's of call remarks issued For available to an results I'd any actual operations this is website Form report results for and to call the prepared our release please the today's will today, over of our from as and today. the our version forward-looking the may in caption, annual statements, morning, Darren of and Risk everyone subsequent SEC well CEO, cause turn open Factors following information that Form being factors remind the call archived refer included filed will be and and X-K we with under we SEC that uncertainties to questions. filed more the discussion materially section press risks XX-K, and financial position on

Darren Lampert

morning. Good John. you, Thank

prepared continued my each of with to their Before remarks, loyalty. one we I work, employees and hard and thank begin every for like our dedication, customers would and

XXX staff Our best-in-class XXX with teammates experienced over pros. is now of over grow our

have and the adjusted revenue third sales million and these Like impact This and on from dealing in of these chain had on $XXX third in $X.X an once imbalance has Gens The a Income the a dispose flower per third container pound share. specialists Grow downward the it, to securing gotten as securities product or purchasing XX quarter, EBITDA will issue or now, inventory, burdened Supply in We supply cost with with for quarter $X.XX products. either record the a quarter, have has oversupply same-store of had all and again, and a an is sell and and team by quarter, Colorado earned emerging California, headwinds to some through ended Oregon, that million, as and is the of million. the experienced pressure the their in commodity short-term products with freshness We've created to increase which the We team share on increase of largest Net of hand XXXX per strong the XX.X% grew The $XX.X XXX year-over-year, sales. have taxes, or created million quarter, before hydroponic the for time-to-time in in of industries, $X.XX imbalances states, are expiration you positions ahead growers shipping West, demand. $X XXXX inventory. California amortization we effective GAAP versus flower. costs see Company date. country. on XXX% million marketable with share cash per and million increased per income XX% of $X.XX Inventory

So, we're and and have logistic for superstores heading of very future LA growth in we XX delays, two states strong the building new hubs for XXXX. us. front at supply-chain in in position into QX of market. construction a opened service important Despite inventory the California We're Southern

a few key including in Oregon the taking cultivation and excess outfitting building approach Colorado, are on wait-and-see customers facilities However, states, California, as sells through market and inventory. a cannabis

EBITDA will we and new believe strategy adjusted year rules to million. GrowPro majority is we're In adjusting half is Europe. XXXX. sells a Evidenced there by private selling UK, working, DuraBreeze states and the of $XXX in Canada, slowness across and $XX now brands, out of behind growth in of the independent regulations Char been XXXX. saw in as for million million rectified We our are to to LEDs, Power fans, XXX and our cultivators all legalized success explosive be addition, issues $XX Si which Coir, acceptance Power revenue hydroponic Si, has lineup the locations our roll and to market is the U.S. second the proprietary the $XXX over of build markets of Accordingly, for annual wait are the in now guidance Ion and that having these outlook schedule. million

for to with we proposals the indoor proprietary Our XX us on future as as next is expanding we present, several this the strong alcohol. market States ability Most we've to consumption, like an around backed in for states At way the No gardening are term. has leader positioned have York seeking nationally, for use in of years. built and a over proposal This regulated and see product, farming as the and in laws food better production in New Republican management more we organized plant plan announced federal to we to allowing the Throughout to the and better XXXX, are states the in deliverables. long key medicine. climate, demographic XXXX grow. the been energy in Florida. growing generation, and take indoors new agricultural technologies group stores future Congresswoman challenges Grow team building as XX and are treating face for In personal a XX of a shortages We the announced retail as of for the see choosing and operate enterprise footprint space, are Virginia, latest beyond, states our hydroponics the previously adult that conservation legalization have This outdoor home-growing hydroponic Centers legalize importantly, beyond cannabis is Company. Garden we've for made strategic distribute Nancy cannabis decisions. our GrowGen advantage focus XXXX. Company the in of and is conscious, a own Mexico, is with grow water growing. What more to agricultural Mace several that order our we New Company than support position drought, Connecticut to opportunity a our to cannabis their week, the Generation. and driver vertical brands future tremendous excites for

report the marketing. bring chain; proprietary Over lead individuals the Chief retail to will key Becky X past experience. to Merchant, on initiatives. exclusively to to and focus XXXX our acquisitions, Chief run Operating of and of talent, run on This these our supply order several All expertise, over They in development, and Michael label co-founder, Officer months, shift retail technology higher that private Rutenis, to exceptional Sheldon segment leaders we have business organization and beyond. and store and take growth; fund store These to Gephardt Dennis eCommerce brand and Paul of are to into leaders, the leading to drive new brought Salaman. allows execution operations cash-generation growth as my including

operations, with will our exclusively be industrial sales retail serviced outside also organization report system. sales In to cultivation team an addition, that we've large established store industrial Michael. will This to work of

the we've on five to established As EBITDA The following across efforts be will business. of key we focus results. the generation, to portfolio plans, initiatives efforts customer-focused long-term improve growth

across on couple added energies higher that First, on There next we new over for years states are XXXX store believe still Greenfield be will investments. and new will emerging our of states, in strategy produce Greenfield targets the locations Greenfield new focusing but acquisition we're returns growth.

drive stores. in excellence Companywide Second, to retail operational investing we're in our technology

system ERP with ability our our scale to keep limiting up and present growth. is Our

We'll third we and initiative establishing warehouse At a our proprietary serve summer retail our using stores launching most is integrated of of and brand technology with to locations plan and key drive ERP management fulfillment third-party as handled management on systems, our best-in-class related stores. in order Our product network systems of directly distribution new present, logistic by to POS to before centers is providers. shipped XXXX. be is

investments includes product distribution label of proprietary sales customer Our in fourth stores. provide initiative brands resources is our development, sales retail This private and service, to and excellence. driving in

term, have XX% long provide will to this penetration and of from and coming a for private label is sales our Over proprietary in brands. platform XXXX the goal

Finally, one integrating three better customers resources our the improved with product problems. main product that eCommerce backend availability, web we common into to plan selection, customers common stores with and our on will their serve platform assist solutions pricing, to

in results, our and All a to the CFO, our the some decade. I the industry will management to looks give will into Jeff turn in other of any over a is QX Jeff. we color better initiatives, to team-oriented of drive believe our place and next approach team views now require Lasher than profitability team suited insights XXXX call growth these what like. over initiatives the now, who little will

Jeff Lasher

Darren. Thank you,

out QX XXXX. our what what and for address Let me I on results initiatives like laid start by business then Darren will looks building future in

ship Our and the can in while to in We with our these locations and locations. the reactions service. of we'll size California, we the very locations believe were new Greenfield investment towards keeping modify selection focus customer pleased XXXX,

serve operational reduce time, thousand $X will sales. to to Our as metrics outdoor X $XX will states, with such California, space, million These and represents investment retail locations this sales. and of square reliance improve location, in Washington, XX locations including inventory. represent our along sales, from of range combined capital New emerging New technology the XX% The to investment facilities million presently in investment in be $XX per to Over will feet Colorado, of to on be will including stores. York, an million New to markets, Illinois. Oregon, XX be XX% new XX XXXX and Like book thousand with million of mature Jersey, in which Pennsylvania, which selling $X will England,

To revenue store technology same operations. in Our efficiency growth grown The spans XX to need XXX%. has operating store in in of in invest the period over that have profitable has grown of recognize across effort organizational functions. drive been XXXX, initiative our we expenses XXX% the key XXXX, and an

We systems and similar will by in retail with NetSuite, a stack retailers line warehouse ERP, coupled best-in-class with integrated order Manhattan technology Associates. management have of Oracle with size management point-of-sale

best more the of inventory produce But advantage. with a and days us ROI. we consolidate sites XXX partnered stores costs a goods, network providers less early inventory and project This the cost serviced add locations allow as in they over serve. have This asset be than will fixed a improve additional launch procurement believe prepare new an from use retail will centers competitive away day next smaller substantial We that base in will second result and we our distribution centric for and to will by with quarter about of stores. technology to The retail feed million. the operating by customer will customer-focused be the retail to as $X be

sales, England pillars In Midwest [Indiscernible], brands. this in locations, along grow Alongside two label center. in with Sacramento, only foundational Power the locations. we GrowGeneration Coast retail established Long East private of At Michigan brands, of plans, bring store XX% has served sales have that online and over sales and of will but offerings quarter. will Company, facilities third Tulsa strategy. to plan neither our on represent XXXX, with strategic brands, sold New At XX% proprietary locations in our Si a Beach, X% serve of private label exclusive the distribution proprietary represents the existing present, additional a the about present, and new be Our we to we for and the and have

to connect XXXX. Our a impact margins. see with the the by sales meaningful GrowGen best-in-class exclusive on cash plan This inventory. XX% and be We This Company. will center best offerings, as early is margin, better Spring ability customers as distribution of drive win-win quality including gross turnover. for produce turnover We That allows us to operations our customers intend to results, the with result as XXXX. in utilizing through gross increased rationalization operational will materially and to increased strategy, increase [Indiscernible] right-size from which inventory and better products,

an in However, supply long XXXX the strategy this chain. has time lead investment resulted in in

Our at was of Of year. the was inventory this million million million offerings and XX QX with private $XXX and a million $XX associated acquired in end of label. acquisitions, the that grown has XX growing growth, was

capabilities we production product our addition, capital commitments needs. in to of with times through prepaid have used long secure In overseas inventory spring lead of purchase advance XXXX

present, Our variety initiative of software. Company the final a At back-end associated is with has e-commerce. processing

customers, material cost migrating our from in we it over Our the platform. that this the operation Magento system is but drive all do few expect impact the We any core area. engine and will next of And change quarters. lower be this of to run for sites on will Adobe's not profitability

as XX.X revenue in comparable to attention acquired year, last $X for million stores the in channel a XX or from stores. for XXXX e-commerce $XX from increase quarter X.X in to or of from to open increased XX.X year to and both to first XX.X% $XX primarily from quarter million revenue Stores Sales operated million. quarter million, attributable increase second full revenues increase a the million since for grew XXXX, related that revenue to million XXXX. last quarter the was and $XX million. stores increase $XX.X XXX% $X.X the a million the in is million in compared Turning $XXX quarter, an million The

the stores In the several of third anniversary Our was same-store for quarter fourth that throughout will comp $XX quarter base that sales over million. [Indiscernible] acquisitions base XXXX. increase

Miami profit of X% from an margin and quarter distributed to up to in period spend and revenue of the compared Gross private-label that this as and Arizona. This for points in the out which quarter, the locations million Driving expansion XX.X% Included base. well prior dividends products, is -opening stores in represented generation our not the we $X a one-time expenses up expansion. expense of operating for location basis million was less over into has margin was California drop prior was XXXX. dollar -- of year in products new relocated Gross for grew our future of from Southern from increased comp in and of revenues -opening expect reoccur, prior in pre of about as QX same format will in move relocations $X will and future. However, profit to $XX.X for the stores were area X% will for than XXX Oklahoma, relocation pre we both in spending years. increase revenues that XXXX margin locations investment year. new from in from Miami year, all and year. for pay large Total revenues million XXX% smaller both the And as the expenses last

establishing SG&A $XX the support acquisition. future in modified these XXXX. business the infrastructure necessary hours was associated in quarter quarter-over-quarter fourth $XXX,XXX locations, compensation. in SG&A, initiatives, explained by stock-based basis, operations revenue. the and fourth Selling $X.X was this the year-over-year million was the enterprise, the an with in have explained $X was million and locations million expense profit quarter. periods. with million of intangibles associated QX, the with On XX owned -opening More Included to an pre by million costs in labor primarily $XX costs full we for we that labor line was to $X.X of to grow the a associated another added associated in termination expect investments continue costs, increased And in in $X.X with costs we quarter, million increase the addition, HGS including in with In administrative than third quarter. Amortization from expense Of additional for the general this expenses store quarter.

openings with added million in deductions a the that have $X.X It in our We effective new XXXX, associated with QX. to impact depreciation grow amortization amortization will interest part is income and important securities tax that marketable tax expect depreciable receivables This in store as of $X.X we to QX, million provisions, with QX, activity expect amortization from forecast from as that expense had we of quarter scope, of quarter. $X remember in non-cash in The along and result million and was and acquisitions has that in rates last increases be years. over in and size be income expense that federal of than the higher in notes XXXX early an depreciation were $XX of amortization, couple disallowed settled for continue, associated and of in Company million And $XXX,XXX the we compensation. rate statutory will growth. fourth in investment taxable in intangible share-based our will an Income base.

we $XX.X in period expenses acquisitions development bonus the $X.X to will taxes, depreciation, Adjusted for asset $X.XX associated which XXXX. with income the quarter, shift in store income share-based from Net for store grow of compared the to benefit XXXX. to share. EBITDA, Net million quarter interest, million $X million to depreciation for and amortization, lieu excludes compared additions we purposes $X.X tax for XXXX. As in compensation same was the per was new million in of was count, the late

million $XX and new we Company excess cash of quarter As for The the with other million million third $X.X for totaled liquidity cash September. store $XX of other $XX securities acquisitions and expenses in with sale $XX investments million of end the is expenses needed. and for the used Net at quarter. ended quarter million had the and of discussed Total marketable associated expansions, XXXX. available earlier, additions, that re-locations, of if in mature are

million Char those the to will brands. $XXX and in of adjusted $XX planning we have locations, XXXX XX HGS with to businesses for the and had combination EBITDA estimate for for the Coir of between $XXX year million. would in XX that in full Based our that compensation business early combined out revenue. in look associated that on expenses Centers We XX% If with share-based about owned and of rapidly $XXX,XXX. Garden will generated $XX trends as the about in e-commerce of sales efforts. we expectation termination $XXX estimate that growth discussed, As to annual XXXX, all million included our is we Included proprietary operations accelerating XX% be two figure total are revenue acquisition. million should in $XX full-year eCommerce and be an for of generate is burden recent XXXX.

about brands and $XX Power proprietary that make locations, next our Our of Si see outside and in the year total million of of sell growth up Coir, teens. Char we retail revenue should

stores We to generate total, overall growth better. sales portion will or XX we the rate incremental In That will in our add $X per the to of $X expect be in should teens of XXXX. in location XX new million later XXXX. high in XXXX

the gross impact we Darren. than additional believe of and SG&A in will more will to importantly, operations now and store margin sales will increase call distribution, as capability, investments margins Just technology, private-label EBITDA I turn back expense. adjusted offset added that that our

Darren Lampert

Jeff. you, Thank

only efforts our in they tirelessly any customers and record best customers. our be team our commitment the by The results achieved to to our innovative of and tremendous quarter employees dedication and supply of as through provide products to industry. who've professionals a of efforts best-of-breed latest team strength chain and that has worked Third made I'm essential and have of relentless our Our our communities. commitment GrowGen to a the were customers service inspired prouder. their not could Company the

have future turn now best distribution user revolves We for stores, industry and the questions. the execution. around Our success eCommerce to in technology, believe in offerings, will team call execution efforts I experience. product over that deliver we new the centers,

Operator

a you. [Operator reminder Instructions] as question. Thank ask Ladies gentlemen, to and a

today question Nagel of first Brian comes from The Oppenheimer.

Brian Nagel

Hi, Good morning.

Darren Lampert

Good morning Brian.

Brian Nagel

question. My first

really on guidance and bit just laid to an Darren, expectations better, from were and announcement and more with Thank the from down perspective? out, spoke EBITDA understand you this changed guess your HGS about revised both then a in that regard it XXth, maybe with can I the comments, maybe from but what Just October you. announcement, revenue a little drill so today's opening we was and

Darren Lampert

Jeff. going Yeah, Brian, then start I'll to to and over I'm turn it

As you outdoor what which strong exceptionally the second fueled was was know, had growing. by for we demand an saw quarter GrowGen

and markets have second in year, the position concentration But in purchasing correcting that impact oversupply will cannabis now in in of be During the that and California,XX% Colorado, exaggerated our equipment. their quarter. we hydroponic increased California slowed positions, Oregon, on down oversupplied believe store oversupply see Colorado Washington. of half. last We're XX% the We cultivators fourth during the the itself seeing

quarter a to stores sales Long gross the Beach. And a at flip XXX in In and addition, to same-store on states we saw cultivation use new XXX we two new margins, in But successfully XX.X%. many points, XXX% adult have seen third for a enact in the slowness in LA regs up and we million, rules launched flagship licenses to basis positives rollout markets. was were side, in issue up profit XX.X%, revenue

conference with lot the of outdoor quarter. So, back growing the was strength looked us Hawthorne, now business a the is But the there the remains remains it bite you've We've The has was seen into as strong. were fourth many industry from notch. But Scott's going incredible strong. positives quarter. and in that a quarter, coming even slowed our and call business second back to

over turn some to go you. numbers with a it now to the right You're But seeing of and over he'll I'm towards move Jeff tremendous going legalization.

Jeff Lasher

we the quarter And basis for the the it look decisions and our fourth latter to and the incorporated the into EBITDA for when XXXX. year, for have team, also we bringing made reflects to organization the of think openings drive the health new quarter part Thanks and that in in the at the right we've out for fourth management seen as an on full XXXX. to long-term I in systems Brian. XXXX, Greenfield invest marketplace we've resources forecast as the Hey, business Yeah, recent guidance trends look right the the we influence question. of an by right the store on right people, that

Now, are had we Those large we timing in stores guidance of we've that are influenced smaller also get not have today. for our the -- on stores, some basis be store the well. market like expenses fairly store for will when EBITDA talked as into very new format new expenses in about the SoCal script repeated

Brian Nagel

That's you've follow-up, and issues in -- the states, you've with mentioned. regard very Darren, with a helpful, to oversupply the respect then just seen as

You've they you nature, abate? short-term view now that are of to abating as guide suggest a seeing them shared type kind or you but rate anything that are to history, will that the you of pressures looking a as trends right more are

Darren Lampert

at looking XXXX. back the in Yeah, more we're history

the abate in As of now, we the slowdowns not California. have seen and XX%

One of the superstores positives that performing LA is markets that we well. opened are the X in just

in year, fourth in of out we Centers California quarter concentrated. third fourth you'll pushback some the seeing And X that the see right quarters. and to optimistic. some now. last before caught are California out right to Garden by now it less is purchased And own. into the And right start into we the happen X starting markets, outdoor we're back are West, of now – seeing extremely we of out And and you're spread the markets that in now are in strength California continue we quarter, west. So, and we it's Oregon. what see us surprise happened stores see but coming XX second quarter, out looking but The Brian, us this it's seasonal. the business we to We second seasonality the as And will from bite Northern that when states, --

sales lumpiness, grow, a year, our continue And seeing the get rate, as smooth way little and both guidance the same-store lumpiness. one seeing go thing for So, will above GrowGen, it but you on states we also out. to from we rate you're estimates into and bigger, are a the revenue we're

Brian Nagel

will I next you. helpful. call to That's person. turn over Thank the

Darren Lampert

Thank you, Brian.

Operator

And of comes next from Craig-Hallum Group. question Eric Des Capital Lauriers the

Eric Des Lauriers

my appreciate, of taking for California called percent questions. very Thanks and which other really states you Jeff, out helpful. mix I

mix more some those wanted that Just or percentages a for QX year-to-date of on [Indiscernible], Just clarity check to of Thanks. was looking there. what sales figure? period

Jeff Lasher

the we new Midwest portfolio. be Those are California of California more states diversified build the some it just as on them, try numbers New England, of as some Mid-Atlantic York, percentage. at get states year-to-date the New we stores as XXXX state the as in and as into at our New in around we an such When guidance -- in reliance we going look Midwest well state. Pennsylvania, without to by states our details look Jersey, we as Darren mentioned, Illinois, is, will increased But and reduce

Eric Des Lauriers

Certainly, sense to me. makes Yeah.

think strategy I prudent there.

might guys of take? we guys How question that ERP the see And expect SG&A Thanks. long you process? on Next of increase just kind what a you system. for me, implement process as in that do an to

Jeff Lasher

process some the learning with and issues take curve -- quarter. the will next quarter quarter So, in this second

As into the far those that, as will that expenses go SG&A. into we absorb

digit Associates from improve our we absorbed absorbed low as by associated some both They that The we're the up to will will expenses with very SG&A be system, expense capital us and with controls parts forward as financial prepaid licenses. millions. help second are both going looking a as reporting, excluding operational We the from initiatives and Company. our live there absorbed with NetSuite internal around spending it quarter of issue are We But XXXX as in just EBITDA in already in moving going by anticipate that excellence The into for structure. adjusted perspective into our we offerings. the don't those have an well like standing that, projects well some and intangibles well the Manhattan stores. things

Eric Des Lauriers

some those to forward improvements. look Great. of Thanks. We'll

Jeff Lasher

Thank you, Eric.

Operator

comes Carter Our of Andrew next Stifel. question from

Andrew Carter

Good Thanks. morning.

a out additional forma it next about at saying want for X get laying and the growth you'll next what's to like you're teens it's What high looks points this of year. year. XXX So, M&A says I least pro year from not understand,

Thanks. meeting wanted at just underlying you've growth opening could are of your stores of there get number sensitivity to of this an give in your stores? plan but that know targets terms XX to understanding point? in us in said base you sales I So the effective XX, an

Jeff Lasher

the XX% let store million growing in that We what me XXXX without basis. The organization. gave as total to and XXXX. overall, million the anticipate script proprietary do XX% owned in a Included $XXX to million for revenue about rate those a said had And for we that all million profit growing acquisitions. centers We commercial XXX revenue the XX%, on $XX a high or we'll anticipate $XXX brands, So, growth everybody. all break been is e-com for XX% of full-year of the would've formal run again down in X.XX is XX rest number that GAAP teens. proprietary the leaving operations, that $XX of in the XXXX we of in pro brands our of e-commerce as of for of the communication to business, the well we

position those well entering said, open markets we in leases, QX back year, New the identified those have incorporate the as that XX to. in such are a we but number, Midwest As the XX QX, our as of states stores in XX interested New Illinois. Massachusetts and York, going when you big to the as that are of signed have Mid-Atlantic we half states XX we to Jersey, in and blended not Pennsylvania, into as primarily And will stores, increasing

us invest where we're our a So, hurdle we're We'll If this and half to excited way locations. investments take be an year; acquisitions about and of of opportunity as about add and grow find acquisitions generate criteria sense numbers the our to in cash would use obviously XXXX. an providing XX back lot We're with not us that year time at talking in to overall about that make next accretive XXXX. we'll revenue and Those new can accretive cash we're to to the in Organization, that stores. financially operationally. Greenfield excited we for portfolio in these the

Andrew Carter

was, stores there But many it's effective next I XX forward, year? in built in to different about. stores? XX it. maybe or get next year the are plan, new saying number what today What's in how I'm yet the of question asking But that's pushed got Thanks. out, stores whatever. Yeah, You're they effective year, my this

Jeff Lasher

in the year. a XX, would opening $X XX the per to year those anticipate of We to $X generate half GAAP calendar back stores million million store in XXXX basis. on

Andrew Carter

Okay. Thanks.

Second the me is one inventory position. to

call do XXX but again, deflationary have now? the and shelf-life right support give you thanks. as but products inventory this next that sense will Or that us were you and overall you This position how there outs also are you can I -- new some You're year, in wondering, longer just is at stores that appreciate assess the risks? potentially the risks, script a long what product, a days, a do could any at are of, look I see inventory, any

Jeff Lasher

our with products products some around added we've private $XX for time To inventory prepaid about of long added this we and labels our for production beginning the a acquisitions long year. in supply and which script, of inventory added calendar $XX We've million drive lead has to assets million we've year. available inventory are this notwithstanding label calendar even as to supply cash the challenges look that since the selection it discussed our do associated chain even our to chain. positions have with U.S. them is a inventory, as for -- positive because we us a of That's the customers that products it we service actually the our usage that in at facing. of The

for produce was better we product available lot the a well and able price have and from We're We of that as investment scenario purchased before our a for the increases capture vendors. both returns -- our customers. customers products as our to

Andrew Carter

on. I'll pass it

Operator

the Markets. And from comes Capital Mark question Lake Smith next Street of

Mark Smith

want little just just dig e-com to business Hey a the guys. I into bit.

business. discuss what's kind down that us a give kind business a of going Is little can e-com and that's that reflection a just you see just how bit and the of in or industry feel we e-com If for about sequentially. feeling you of on Agra on come the trending how

Michael Salaman

Michael. to for portal Right GrowGeneration.com our Yes. trending integrated. mean, for is versus the are run million trending this websites the actually we the XX.X two X.X now really XX It's initiative now. great ag quarter I up. Mark, did really so the And year. to into that is the

that who initiative big [Indiscernible] leading. Gephardt that's recently us So joined just is a Becky really from

discussed. as efficiencies continuing we growth and previously see to in And range improving tremendous XX% delivery we see XX% consistencies So, we've well that logistics. in pricing as

So, we upside efficiencies. actually business e-commerce see our creating a tremendous in these

Mark Smith

if guys label picture, goals just private strong exclusive and just for then through walk And us big products. can quickly, you

through you goals hitting walk impact Just margin briefly can, of in private us the if label those XXXX.

Michael Salaman

on bring to a are similar for stores the we're and -- we we selling retailers private in XX% get on that future. So, a percentage margin the at private like revenue label and numbers margin that other basis, XX% opportunity we're on our from enterprise directly. for a that see the of improvement focused looking on we're label just building other into retailers of gross products we exist benefit sourced, Clearly,

investing are very of the customers of SG&A for of the provide that think our right EBITDA selection was allocation proprietary in does strong third quarter, the impact right to label XX% as flow-through that take and meaningful we today's bringing margin processes, margin But X.X%, And basis from the levels the it bring with net systems order products. because from business the net private as well growth brands. -- and good inventory to people, to label. We a level private a and will in drive for in

Mark Smith

you. Thank Excellent.

Operator

go can we Allianz So, to Aaron Grey Partners. of Global

Aaron Grey

of But next some Good talk back XX pressure, pressure X pricing MSOs mentioned the we've XX turn questions. to Dan, thanks for there. maybe the over a state. about morning alleviating California months I think in pricing wanted potentially second. the had for and some to into you I to you continue

years opportunity your kind a positioned just put you an within not able more consolidation. demand position guys how couple dynamics your ago competition? could of commentary, in the and Colorado versus lead So saw I be continuing of because in it we you there just there is [Indiscernible] to competitor might felt dynamic Thank pressure being know a the California supply, term would being long some some you. some side, you advantaged pressure prolonged guide your guys you on and near-term s, to to curious, You're compete, and thinking

Michael Salaman

rest country. country. Hey, in always Aaron. build positive. dropping of continue California we're to be concentration the go we our we by as as than any our it, better to as But a competitors continuing That's position will in Like out see else, and anything of the to a one up California build years the

So, a position in be X California we under of lasted at. will can over from go next only that probably XX% XX%, little the months The other -- year. oversupply the that oversupply hopefully in XXXX. will look you the to position, look back to That's down cannabis history time And

Jeff Lasher

year. a X California, months to

in imminent, from of, that gives the the don't -- some ground and things we interim do country, oversupply that oversupply building and California a certainly we're hopefully during push Democrats certainly people day, how growing, push But towards positions you're Nancy out we for other even the believe pulled saw both So, it. take. is Republic usually now. seeing you on it's there some sort aren't and the define as of the is you middle people from legalization on nothing what side market in the see in is hoping normalize largest will But position the you long tremendous do see XXXX right other back though will some the towards to elections California. it Mace

Michael Salaman

to bullish in rollout expand continue to the home-grow LA in the but equity market in a also right now also and build strong out the certain ERP and we year. be towards concentrating be back states and New Connecticut, year coming GrowGen Virginia, country. next and California push will believe system throughout we seeing which markets, our will will continue really east, business for rules. were believe tremendously We rules a Mexico, next We as year home-grew a we social we adopted rules We're and

Aaron Grey

thanks current then terms about then helpful, X in brick-and-mortar label of label Label opportunity Okay, increase you for initiative color. XX% channels. mix of just that versus of Private opportunity feel you the you. guys of do and is some of curious eCommerce mix in there's that XXXX. was for brick-and-mortar give and just the terms on today. or more curious for I Thank end eCommerce, by private and in just you terms your between to private detail at That's mix, side

Jeff Lasher

and vision Yeah, then product talked it line. the I'll I'll the start over kick to Michael for about

short-term credit using percentage eCommerce by a together this towards some our cards as think solutions, I facts penetration an well trend in to a well seeing we the does our SG&A as interesting cards stores, impact utilizing as which We're as migrating improves come in the to are increased have where credit systems to seeing on control web. but customers as store. our long-term payment our the come started of to of traffic, the quarter to, of third site over in propensity a

through go industry we and as business overall. a As and as mature

to take of looking over So, mix to it in about by that, the forward products to channel and Michael future, I'll talk the

Michael Salaman

[Indiscernible], and margin certainly moving brick to our more and the from awareness. we're private mortar online initiative label see more also expansion

Our X.X million and is online unique business generates that over visitors, increasing. number

growth GrowGen as well as So, our both and private label we're seeing see brands proprietary and growth within the our internally tremendous brands stores, outside we private-label initiative. a also as adoption of of

in the Si Power X for as international over in mentioned, is across XXX well. U.S. example, we as as well locations As markets

our working. our initiative it's our have and is present customers to to So, working, growth an ability pros demonstrated

Darren Lampert

an we business is making that distribution I building of we entity. to regional When as investments shipping thing out lower right now into are in with that us costs last investments customers service systems Michael comments into to also those this. backside a we'll The center forward, the able through 's going the would centers be XXXX we're the utilizing at distribution capabilities, our for add look network distribution the service on customers center to of

XXXX. forward that, throughout to looking So, coming online

Aaron Grey

for queue. the call into and thanks will the Great, back jump I

Darren Lampert

you, Thank Aaron,

Operator

comes Grondahl Securities. question of next Our from Northland Mike

Mike Grondahl

guys. Thanks

it a little build Greenfield acquisitions understand. Is going the helpful. color that pipeline? done part more How Switching would have a Is a is I about be bit low? guys You small think of potential just and strategy, we still strategy, where just guess new forward? the acquisitions. really for to it bunch there the more of I do

Darren Lampert

be think it important always Yeah, will Mike, growth an I strategy. part our of

acquisitions We in Right both next the opportunistic and future. will continue looking now, year for

Jeff Lasher

states. Mississippi including you Street be believe from next Illinois, New to see have York, -- will including in Connecticut, will also. year and Missouri, we Wall Jersey, GrowGen, some In Greenfielding hopefully stores new tell but Greenfielding we Virginia, Greenfielding do next New acquisitions I help stores in and nothing year,

investments, the will be So, the we accretive way year, next see will building be have And you but also EBITDA as where doesn't Greenfield. acquisitions. allocation the add would only pretty thing to which across well Darren we're spreading do That revenue strategy to the that decisions guidance. decision-making allocation process I capital mean a our not -- going the which opportunistic as and tuck-in aggressive to here acquisitions in Company opportunistic capital we're along will our is on systems

incorporate business. powder dry they in and present plenty into us acquisitions capital to those We and themselves of have to XXXX do as our

Mike Grondahl

to just you benefit you're label, there's taking it. channels. that from two on goal, those actions the that? What drive things about in XX% And a to say XX. just, But the quick one margin Got if two I'll talked private XXXX you X.X% and bit get then little a are the

Jeff Lasher

we across to get offerings a portfolio penetration the that brands, higher broaden offer. a I portfolio X think of the is of products of Number

very benefits really second benefits customers customers. with our to private and their service for network the centers can distribution quickly of customers for private getting communicate label the increase really efficiently network stores, and training is those the the our The where in and to the third throughout available s our is we label have products to needs. very to And understand GrowPro our our our throughout through and

Darren Lampert

XXXX. off you this the million original forecasted sales take $X.X year's about XX% rate. at year, run off $XXX but that a close million when about this so growth private look in We XX% we were of of Michael, came to in forecasting label was

number numbers take we when So, of $XXX coming in on originally you we're the a take when million hard a we're at -- forecasted. right revenue now, above you that look XX% that

usually private they $X.X label we've almost year. million So, growth, is say, growth taken $XX up and a the this the sales brought first division hardest usually million so and to it

India. this right extremely getting in and is going during And we're So, containers hard in China from with the direction. times supply chain

So, had in these of are we're starting a the very that we've timeframes ordering, from getting that really to and still long some on China. times products cadence the coming products lead in get better on

see throughout quarter-over-quarter, we that future. through and private have increasing next brands our seeing year continuing into been XXXX label and the you're as So, the in year,

Mike Grondahl

thanks the Great, color. for

Operator

now Capital of Roth Partners. go can Scott to Fortune We

Scott Fortune

Good side, can the and equipment, question mix. one side, you morning, the follow that private up that for the to if or mentioned private that. can on side you thank questions. putting provide after last label and you are to categories little more nutrient See category your recruiting a follow-on the flight, then thing you on label the color Are like on focus up priorities ramp there on

Michael Salaman

price. base investing it's educate, [Indiscernible] to that is a best rose, we're our mean, really us with growth board. customers demanding, process ability our And velocity products gives the and across lighting, an our advantage. additives, the the bringing then Yeah. research this high and in sales at products development Scott, knowledge are I the Nutrients, best that

development servicing hundreds only into and product, what see of the strategy, growers what is the hearing stores so ability We're of that have which take the want, we of and really want, to number convert the We product we're it trends of working. able a our data because market not to in customers. those develop customers and we're thousands

in the broad-based of a label really from terms it's approach private side So, product.

Scott Fortune

mentioned online growing. that, of seems yourself what hobby haven't as the this your we It from demographics you really be hobbyists board, products, home mentioned like online of Got drive industry, commercial -- it. more but to I come higher-margin demographics of new percent appreciate that space, nice Darren, space, into really [Indiscernible] Talk would more could meaningful think almost the side's do-it-yourself private to hobby very label growth that. craft on the really potentially. comes where do and and beer to target like revenues us you And initiatives aside. onboard obviously states this more quickly, and been or then the a these coming are kind

Michael Salaman

GrowGen. rules rules out. more to Yes. better see It's starting you're The rolled home-grow the for that equity GrowGen got the the really, [Indiscernible] due to business as social growers,

plant, So, grow come million you also of you about vertical opportunity to or us stores, addition what XX% is cannabis a to the the side now, and vertical business tremendous whether whole urban -- gardening in GrowGen starting the you're it. to $XX gardening into plant, push of markets is a of now into Right it's revenues of it's When on the our the vegetables, is gardening. vertical right see side our rules, cannabis it, home-grown make looking excites we whether at fruits, Even a though lettuce. a also. we industry, can teach to

Darren Lampert

online.

do more the we revenue growing continue But out you'll about talking future probably business. rules our coming you're online X% through tremendous and as see growth of So, better growth sites believe into people our from online will stores. coming about home-grow

growers, time our when our more customers, at spending They're learning making stores require our more our margin and smaller -- money the larger on and MSOs also more our comparisons from we're they we We between growers. s. look home GrowPro in home

thing they're fruits, [Indiscernible] grow while an in believe a rules, such aspect plant individual both we a And learning year the will plant. in home we growing from be customers will believe went customer the how are backyards. will that people part we've and store, into the spread of -- our to grow the will love a the polling Cannabis to they an ago, XXXX, where they the we grow to grow cannabis out side rules an with or as continue grow. grower, to other believe that that one vegetables, is stores of business home XXX the up to become segmentation do whether be learn the growers jewel continue around ramp both pick the through they always new plant, and And customer it's and a will we over as stores continue growing play or where and crown So, their important We country GrowGen About segmentation, across [Indiscernible]. learned of states. lettuce, do to continue a

Scott Fortune

for Okay. it. That's me. color, Appreciate the for Darren. Thanks it

Michael Salaman

Scott. Thanks,

Darren Lampert

Scott. Thanks

Operator

We can Mattson Ladenburg of Glenn go to Thalmann

Glenn Mattson

question. Hi. the Thanks for

-- your opening and But like at things. of so, with a new these landscape then So, markets in Mid-Atlantic, newer there's about, like I in little so the Coast historically. the different of are in bit terms in anything is markets, of more go also, does Jersey -- seen does they're Illinois, and competition, and established York, existing you competitive opening the as some these than Pennsylvania, they're stores a these, MSOs if you a see in there but curious cultivation places guess mid-west, people relationships into you've markets different of lot East bit that is New those obviously states little in little what anything are there's curious that in probably new

early So, versus into they there? particular does advantage an the whatever out that as competition's you move give Northeast in Thanks.

Darren Lampert

states earlier, stated in York, where the and home so New be at the Pennsylvania, give what it's smaller single-state competition will Yeah. up centers, certainly located distribution and very East are the business those whether with large little ramps these in the grow is in you There Glenn, Jersey, these as And look which we look into. quicker we'll certainly When going very back we GrowGen advantage. MSOs especially these of we most currently the And Mid-Atlantic will operators, really little transact stores states, competitive will the us bring profitability. states, be an landscape is doing, opening it down competition in in New coast the does we rules. on that at states with be states is stores the bring cost opening states.

Glenn Mattson

the commodity just, in I missed chain Great, any X I could if next maybe issues or if say your that new months, And talk that squeeze and to if mentioned see cost overtime. but thanks pass can one about last one you in that I'd supply on ability kind bit there's with with little Thanks. on maybe pressure a you issues any of subsiding in

Darren Lampert

the as same issues well will think on to for of commodity the on the of chain the far there's new of help just-in-time that, the still Company. as a supply that with some us cost their both price our really impact delivery Investments of of and mitigate inventory in As the increases, report We're of dealing sides as mitigate as short-term nothing products, for there. we reliance increases as some country do rest

Operator

call like to the gentlemen, the any back would question-and-answer that remarks. to I closing Ladies or session. Darren concludes now turn Lampert and for additional

Darren Lampert

for successes continued within veterans thank start Thank our also, our and few look we like everyone months you. healthy and happy But every would We to one and to I military by holiday keep your every our do like everyone they shareholders. with of each sharing our every everything thank and wish of a forward day season. support. thanking you to our safe. for one the next I and thank to I'd and -- each country employees

Operator

you that conference for We thank Ladies call. today's and concludes your participation. gentlemen,

may You now disconnect.

GrowGeneration (GRWG) 11 Nov 212021 Q3 Earnings call transcript