GRWG - Earnings call transcript Q1 2022

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Operator

Please stand by. Good day everyone and welcome to GrowGeneration First Quarter 2022 Earnings Call. At this time, I'd to turn the call over to Clay Crumbliss. Please go ahead sir.

Clay Crumbliss

Thank you and welcome everyone to the GrowGeneration first quarter 2022 earnings results conference call. recorded. being is call Today's With us are Mr. today Lampert, Chief Financial and Executive Chief Lasher, Jeff and Officer; Officer Darren Co-Founder of Corp. GrowGeneration

detailed and to issued are cause subject to actual have Investor the should GrowGeneration's today's press earnings today. concerning access the forward-looking those information after statements release This with several the company's close differ the Certain available could materially Relations differ at section Litigation and to the events of could based actual to forward-looking implied You these that is provisions from a or of made Harbor forward-looking market ir.growgeneration.com. expressed release for SEC first materially uncertainties to beliefs and in on call forward-looking include results Safe expectations These results current described this website discussion cause management's XXXX. future press refer statements, risks Private Please on the are Reform on filings any quarter today. in comments from Securities to made state that of statements which risks other are of those subject and Act the statements.

on non-GAAP financial most directly performance. comparable the call, we as website. financial to the as release non-GAAP our measures available will use SEC provides we GAAP describe press During are business filing earnings measures some The the well as reconciliations all of measures

question that one prepared limit Following follow-up. take will one from We remarks, we and you analysts. questions yourself to research ask

time re-enter them allows. the If queue you and as please have take additional questions, we'll

Lampert. our to Darren? call Now, I turn the Co-Founder and will CEO, Darren over

Darren Lampert

discussion some results our XXXX everyone. afternoon us of for our joining you, to brief reiterating our I'd And vision a guidance. followed by for confidence retail start begin what guidance. then of turn to quarter today call you highlighting XX vision for locations in our seeing thanking financial to longer start Lasher, our year like employees updated positive and term I been first the our your cannabis discuss which Thank Jeff who U.S. our developments full market. that the hope; to has strategy. a will support I and you through challenging and over XXXX corporate with we the continued take than plan. of by a our Clay strategic full I'll results summary Thank will strategic and to each the first our against GrowGen through the year, quarter and by in will details quarter of dedication GrowGeneration, across the slower finish good center one currently and we're CFO, year in

in exists long remain While quarter we inventory, with would confident demand that that has. XXXX is the would didn't to slower us as remain anticipate of has longer as start hydroponic opportunity it excess prefer, and We slow for industry. within term any off than it hydroponics a as for the as entered the we

in the obsolescence quarter, gross originally a than As planned. our impact a negative first lower we on base a more vendor from rebates consequently fewer result, which saw sales and we had profit

to And future. that isn't a industry of firsthand, In did experienced As in the this expect weather in GrowGen I as to we our pass business has cycle. you to near the will this one the financial reassure is focused under on the controlling fully you solid the we time time, can meantime, are first control. on this areas want cannabis are tell footing downturn. And I last the it the trough

to believe eventually turns, market which it we firmly emerge result, a stronger will. the As are we well-positioned when

We issuance. the ability to strong need and cash the words, or a currently have has cash equivalents company needs without sheet with meet of have anticipate operational capital. other debt. don't we zero the external million In balance $XX the We equity of for additional and business debt the

a in pavement HRG operations acquisition, market space. way taking to working more While liquidity aggressively optimization, from light of we will structure persist quarter inventory was of if in after our current about cost business an discuss cash cash to to purchases rightsizing good the business the operations. into conditions the and mentioned deposits the We're this negative this customer calendar our active year. positive capital well demand very even which due generated that future, I And detail throughout our current Jeff feel approach position managing in to cash the the we're say, preserves from more flow the underlying later. the in in foreseeable

focus you Northeast, that do it which capitalize regions, New for and growth Midwest states opportunities on the our in and and believe to oversupply broader for soft, all, I'd like cannabis we us business, few words will and GrowGen say remains XXXX. including we about a our England, large More California, of dynamic Demand better pronounced as industry. grower Now, rebalance and will in efforts. the but initiatives remains I projects. our see year, sales. the CapEx does. such halt commercial of we shift, strategic hydroponics over a you on tell the will we a as tell the Oklahoma, five see consumer On where which marketplace. positive growth represents is for but when emerging That to in most specifically poised is exactly which can markets, this This when cultivation to note, position is want can't aggregate in our XX% Michigan, I this I greenfield reiterate in

retail in opportunity. First, growth prospects our we is think the on greenfield opening there locations focusing we're where potential most

open New before Mississippi, in Jersey, this and first As plans New we've outlined includes Virginia retail new year. time this to Missouri, our York locations

new XX existing markets to While XX store open stores new location retail adding open our goal new is of we most decision are strategic an reassessing oversupply our to plan year, to stores goal with XX in our pronounced. Mississippi where June. We reflects not to our XX this

lease and in New are all And Virginia second Jersey have Missouri, plan In to signing locations we the at the XXXX. addition, half opened of these stage.

to We New also York the of operational locations end by have XXXX. plan

to operational Second, companywide investing omnichannel deliver excellence, to are strategy. in drive technology our we

Our a enterprise and resource our system. planning, demand or ERP, unify planning in platform transactions efficient will cash speed register create the inventory purchasing databases store, and at customer more

locations a establishing to centers five in e-commerce we're our Third, commercial serve of customers. key and stores retail network distribution

East our in costs, of retail launches sales, and distribution will open retail fifth Midwest, which to proprietary England additive and Having West the our first over driving allow sales private freight service and will with Our overall maintaining summary, more are with revenue excellence. space results sequentially New and label the for to In In from distribution products. sales we first This business, is that generated Hydro, in starting and of includes our stores our the retail of Mid-Atlantic second $X.X including service, each in store and customers segment, our e-commerce is regions. and retail to proprietary in of our XX% stores around long-term HRG, lower far sales non-retail Coast QX. stores the GrowGen pricing, June, us us Drip own year-over-year XX% May. X% second MMI, operations of development line, resources in Revenue we Power distribution recent and a quarter. Fifth, month month private million quarter, non-retail competitive declining the in of combined operating in an total center the feet space. so feet Fourth, square as declined brands, both quarter. million $X.X to well later the and this and service infrastructure on capabilities sales. of comparable acquisition incremental level. sales. and Si, enable in abated HRG Charcoir our XXXX, brands ability Private across in million hydroponic label expenses. national nutrient faster operate e-commerce to label distribution in some warehouse to now investments other of customer accounted XXX,XXX us have online serve comparable and label and as our our freight expand private distribution into product not delivery This our the of site to in better will reduced of leverage mix efficiently adding We XXX square customers X XXX and a times skews our warehouse items distributed the products, the on weakness quarter provide sales

strategic and us from believe including We same-store XXXX. large durable initiatives, Our lighting remain we retail stronger accounts. and for demand pressure in commercial will lower well to make and from declining these committed these remain as strategies under demand goods, HVAC products, as firmly commercial sales

both guidance the sales adjusted detail As year. Jeff continuation for for the essentially full environment net our of will are revenue you, and the EBITDA the across we XXXX of current the reflect to year remainder for reducing

Lasher, Jeff? improves, now approach today. the our Officer. the hope Jeff And Financial we we this we call prudent it's given to Chief market where think While take cautious to over more turn I stand will

Jeff Lasher

and you, Darren. year quarter Thank our our will then updated address will I financial results today. XXXX I first guidance discuss full

decrease representing revenue sales million from first of first e-commerce stores GrowGeneration and in quarter approximately of in or and including to was This in million revenue same-store the in increased incremental for in $XX.X or periods. decline a quarter, generated million. businesses, both of decline revenue $X.X in and the and HRG of integration revenue offset year. stores, million in primarily opened decrease last The $XX.X XXXX. X% web non-com by acquisition stores from versus a million to non-retail same MMI, revenue the in in XXXX was of attributed $XX.X the $XX.X stores first opened partially the million $X.X quarter For $XX period XXXX, Sales million acquired of a million $X

first XX% down in first and the the The e-commerce XXXX. the prior for impact operating unrecaptured XXX quarter, profit expense, the first declined stores, segment. expenses of basis year, generation sales quarter sales pass-through to fourth our of quarter. of e-commerce first million year XX.X% quarter was QX. decline a margin $XX.X activities. representing profit comparable segment in prior and was from for diluted million, from and non-retail year cost, stores sequentially discounting from write-downs Gross the charges freight including dollar quarter quarter ago of from acquisitions and $XX related same-store year, impact retail decreased up a but XX.X% prior approximately additions points to inventory the the retail Our against our customers in Total freight compared of margin Gross was decrease to the year-over-year at

overall versus to in increase quarter, several in totaled $X.X the an addition operating Selling, acquisitions, down quarter store the administrative the XX basis retail was and to compared million in operating expenses, fourth million derived an we from year million for to MMI of $X.X in first year-over-year costs million which stock-based at basis, the non-retail the of quarter the the which ago a $XX in on compensation. of costs $XX.X On XXXX. SG&A contributed general locations million However, in compared and of absolute HRG sequentially quarter quarter XXXX increase Of the period. first were first comparable of in resulted quarter added $XX.X XXXX.

steps including recent to of HRG expenses, quarter. an and incremental SG&A the e-commerce stores and marketing the Additionally, expense $X.X We've of in of expenses changes. payroll, reduce million added consolidation the web to that the a taken operational decrease resizing operating acquisition number MMI

and For of Depreciation an totaled of The in for in we expenses about that breakdown store and reserve was new termination quarter the for increase bad quarter million. first $X.X including million XXXX. and of expenses, $X.X amortization depreciation million technology. the the had of amortization intangibles higher and of office is openings $X leases, debt million $X.X

tax amortization the associated provision As of we was over in last following the the million about quarter XXXX first forecast years, a go the HRG. quarter. that with of $X.X credit depreciation million continue, we in XXXX the of couple forward, acquisitions will amortization expense $XX in and Income net including loss XXXX, acquisitions be and will

Related Net income a compared For per $X.X XXXX, loss a amortization the and for EBITDA, which purposes. we with was are for diluted net $X.XX $X.XX first per of for million Adjusted quarter was share forecasting comparable a securities for $X.X ago the XXXX. to sale, financial the million of that to first depreciation, income sheet of interest, balance in quarter associated share to million quarter. the of Total legacy marketable first the XXXX $XX.X tax and or sheet, end with or expenses million ended the cash loss compensation, million. of legacy on quarter liquidity the the diluted are compared $XXX,XXX of company taxes, excludes year available share-based loss prepaids quarter if XXXX. company at $XX The $XX million reduced ongoing million about the balance and of of for the $XX.X was mature needed. $XX.X by and March, company inventory

inventory quarter, operations inclusive million $X.X with the payables. million including cash to acquisition to from and to increase payable the receivables end the million acquired from activity. at HRG the after Prepaid acquisition, However, Total used paydown inventory inventory $XX.X addition million assets HRG $XX.X the at Quarterly in purchased shortly and of other quarter. $XX $X.X prepaid fell in flat HRG was in million fell the $XXX total $X million of million. to of accounts

million require liabilities, items. of the cash to at including end in first reflecting the deposits that quarter of the resulted advance operations $XX.X and $X.X consumed Customer XXXX. of of related million at in of capital million other payments managing payroll also products underlying an from working end production. generation fell We million accrued these capital commitments of $X of about March, needs Overall, from in existing end $X XXXX, lower of deposits at the for XXXX

million. usage by However, million quarter quarter HRG was was the cash for in flow inventory of from the the of cash $X $X.X first bill overall result operations in burdened a and of an

year. planning throughout April, sequentially We projections and country and of acceleration of since are the revise for in the sales quarter forced expecting sales of have in later it in store across XXXX. comparable The the an the sales downward the our results the deteriorates us decline for first month now to half

on beginning seen basis Specifically, April in and improvement was XX% any not down than same-store May. have more we of the

a for at below QX. or declines we As comparable results result, sales are for now and QX forecasting QX

are comparison up in sales comparable against a decline in presently high QX an forecast We digit easier QX. XXXX of single store and in

to year-over-year third a We and basis. in expansion projected fourth moving into the margins on quarters by expect quarter gross pressured, a second margin remain followed the

our We business are the focus to continuing take executing during generating industry steps strategy challenging to operations from in environment. cash on

sheet and position. the up reductions, modification key tight are management on credit We to and focus doing vendor cash this of with terms a inventory of shore authorization company's balance

XXXX As was operations in cash positive mentioned first the by quarter. legacy the generated

cash control in and we made not was So hydroponic million, a does wholesale common the of of substantial investment the build offerings distributed Total business in the investment and materially inventory the acquired systems had did issued of the time valued support in on quarter, business, acquisition acquisition net that specifically million we At million. the for stock revenue which XXXX $X.X inventory and $XX of of course HRG and at the XXst, after HRG contributed in of into contribute expansion brands the EBITDA. the acquisition of but to HRG. additional inventory, used include product HRG the expansion $X.X acquisition to not lighting. inventory million $X the January of million $X.X LED

We outside for to $XX store we of for primarily total are million planning investments $X.X million. spent buildouts XXXX. capital Thus in have $XX of acquisitions, far, new million

EBITDA agricultural are retail, centers retail fulfillment conversions business from expansion across to expected and and addition for better and in converted the selling MMI country. to fulfillment MMI, cash as produced the a former systems enterprise continued the than markets. only benching retail both specializing The racking and benefited in company locations of manufacturing with The other vertical that flow of center multi-channel

today. full and now $XXX adjusted seeing a year current be million The are acquisition. $XXX of and revenue breakeven, expecting to EBITDA we the million trends XXXX all be above to low including range guidance are embeds million, our year $XX between continuation but end full than recent We less of

adjusted to EBITDA expecting we to different significantly relative the of results. are quarter such, quarter second As not first be in XXXX

cost. the due gross to elevated year remain to freight margins pressure expect We discounting the balance under throughout of

in retail be the absolute controlled expenses expect before on third and in sequentially due to the quarters expansion second store footprint. We quarter an and operating basis of increasing fourth down to the

As will XXXX will expect said brands to we our lighting Charcoir and continue our other call, industry HVAC Si benefit but be product, we pressure. from of on for earnings under and focus proprietary control last on and that systems Power including the quality and yield areas,

constrained significantly result, purchases inventory we means. working brands as we focus a decrease have As on our capital our and

the the portion as will latter throughout sales of We the they in should online new incremental of come generate XXXX that add stores year. balance

So a on location new in Texas stores border in opened and XXXX, Auburn, Maine Redding, have Ardmore, in we the relocated far Oklahoma California. and

more before will East followed in by Our markets the new year-end. throughout the new Mississippi Jackson, this summer, open location Midwest locations and

Just in as on the label benefit including years. EBITDA balance focus increase will items cash sales and investments from margins receivables. by additional future inventory will our business the Total and importantly we believe generated capacity technology, private management in that distribution sheet and companywide

cash modified need debt insurance. our We cash our or maintain and strong meaningful without tactical to from external a year the do will adjusted in not immediate substantially. anticipate of equity We debt that We EBITDA. foresee response constrain purchase a market we have operations do and plan for position the this generate inventory positive excess

audit out firm. close, like changed company I point to that the Before I'd has recently

previously date given this filed with as change. the XX-Q SEC later required such at disclosed recent filing will and Form and be As our a

information, with see filed the today. Form XXb-XX more earlier For SEC our please

a retail technology, for superior and to future platform company set over Darren With and execution proprietary closing strong profitably. scale capabilities, for new focus that, Our e-commerce remarks. turn strong distribution private back label I built a will the improve a the call locations, XXXX for to on is brands, to up with

Darren Lampert

reiterate underlying questions, downturn. are Thank Briefly, position healthy and GrowGen not with before strong the weather satisfied quarter. with is prepare solid a a industry lines reductions balance to to our acted quickly We generation. in liquidity I to for first solid we with January the you, Jeff. sheet, in financial cost want that we open results cash on footing

to fully. excess cycle GrowGen We eventually are recover which when the in we quickly cannabis it that and be marketplace normalizes, and will, believe firmly turns the well-positioned confident the supply will

Our strategic expansion independent into distributed our of proprietary brands locations acquisition our XXX outside of and HRG retail accelerates our locations. of

leafy of your more believe sustainable We for local with and indoor Power cash and to gain vertical and are in MMI fruits, your cultivation We'll satisfied vertical indoor stage, and to our ag development on invest reduce are take will local leading the and and projects selling production nutrient tomatoes, time Hydro, -- very taken focused plan. thank your with food strengthens position both racking our Operator? other greens, of very growth today our environment, the interest begin only are you needed now to Thank systems, and sustainable our question. actions while and for results drive additives. communities controlled Charcoir addition products. farms to Si We've expenses to you in of excited generation, The we Drip our beginning agriculture in and benching GrowGeneration.

Operator

you. Thank with from question And Nagel our Instructions] will [Operator Brian Oppenheimer. first come

Brian Nagel

good Hi, afternoon.

Darren Lampert

Brian. Hey,

Jeff Lasher

afternoon. Good

Brian Nagel

is I you. want for question geared Darren, first think, I ask, So, guess, I the to more

comment you basically last talking the oversupply, Just in in because you guess, cases, some it comments -- started from better perspective, we an perspective year. going if headwinds to opening these what's what's picture look slower -- bigger your from industry a made through remarks, at back I the licensing, midway about prepared here, understand happening and -- --

sound they West we'd it's -- now it's markets and they, thought. have than now other Coast what's if or not oversupply say longer further now. into as intensified well. persisted, California if not headwinds think these the it issue, I of most And happening correctly, just these I heard a mean, us I persist some actually you like

Are a I self-correcting you purely there would is one it demand does actually that a -- what's a issue within supply as issue? supply mechanism than demand? a maybe And issue starting happening? is to see year, sense Is there? well? there a or make there like guess, persist -- Is could So, -- more it

Darren Lampert

does To Brian. start every start there's can of that licensing I in. business certain amount with, some state GrowGen in

you everyone seen in you'd states in it Oklahoma, Oklahoma, came really the state. move XXXX red took going California, seen with the election CapEx opposite. to tremendous we industry to tape, you've you our seen. systems new a roadblocks to more new what is that's government. And you And of is California, you've was that into to And from out we've And quicker the but of what in the is amount as off you moving this fully five Michigan to green new refresh legalization And always the states in built is, as every you've the Michigan, wave, after would what more states. when spread we're What that, coming always We So, area. seen opinion are wrote were saw out. new we buildouts come seen and from same start the what mature, from quicker, see market the with to sweep, much see and the states is see into products would control else was starting cycles democratic thesis states XXXX became three slowdown other lights to were money what buildouts. you've XXXX state in our opinion that a of And that more is years coming market. and that

LED lighting. to upgrade You inefficient any saw also a from energy tremendous cycle lighting

right dropping pricing and of fully it. excess states. of the in built Street states seen cannabis oversupply with markets And on certain of seen seeing you've you've these back in building But seeing an persisting. seeing Wall also -- out So, are California now illegal you're in is side are also step And you're fueling we're really the stop product. that the

-- perfect in a a the lot certainly, So, not area. for way ways. the storm And you're good not of hydroponic a seeing in

it heard other the AeroFarms day. call You on

You're going Hydrofarm probably today. to on hear call it

right perfect you're now groups facilities. storm not this building going through where are new So,

really is which dehumidification numbers of our in the control LED some So, disappeared, higher systems. business lighting, sales have

now consumable GrowGen selling So, is to day. products basically every plants grow

in have stopped. of if cannabis And supply be cannabis. right some now. and just consumption as some will and decade, -- still $XX take place with of right of think the that is proponents -- will that belief for buildouts industry some I $XXX will tough big in industry billion demand that times. the But from is back where certainly the sits to and the off stays stays it hear now, But industry many our going low we're And more billion flat this you it

be tremendous building. that, there will So, of a amount with

wait So, GrowGen and attitude. see taking right now a is

As cost We've today, got cut you it. tremendously. heard we've ahead of

on pretty staff So our right -- EBITDA stores we and We much inventory EBITDA the sized breakeven. now beginning of running down. right brought the within an adjusted year

to back to past are money. point wise the And these right will balance individuals square now. supply do -- that aboard. west, you'll the and open believe believe bring cultivation. in back will almost strong June. been stores And markets growth very stores building And going oversupply and New will where very Mississippi the start on as growing demand three We're Virginia, high be open XX,XXX outdoor York, we conditions a is come have that pushed New out now, in has within which be a store that market, weather The season building we have We're weeks We the foot right see should building west coming do again making we sheet very, in and states Jersey. industry. new they out

see not So, haven't yet. of year. the still to spring but as we coming, hoping we And we're that pickup last builds we outdoor saw that seen have

right we're And until with So, the market. in being turn guidance now. conservative we that see extremely

Brian Nagel

kind you to you it just That's is, talked the here track just guess the follow-up, help difficult you through you to pull just then, really to even Jeff helpful, the more Darren. about stabilize you of could levers financial weak, I results used -- or period. kind other for levers, Darren my as to what pull And maintaining allude But this are what would well, pull maybe extent the could -- that are here weaker? the side? or What finances

Jeff Lasher

Yeah.

there's on HRG, for our few on take business. inventory through down legacy the we our things incorporating from think, come operations, from inventory the our you them a number overall ability for and business we out to to XX/XX our when investment the of made is that and We've us in numbers the balance still HRG, are year. sheet work can focused distribution for the you we brands to and one focusing on position. are numbers, out into the guidance, that inventory at turns see in us And county cash to continue the far, situation. come and on in So, for improving course year, the to continue that look the focusing I withstanding today and that -- as convert strength, with improving inventory substantially that We've throughout improved so it a additional turns. and this we offering calendar on more fairly MMI not year, we The

within will costs, both to the management of us we've distribution our new the physicals efficiencies, better in will investments the months, understand to the services that at level, level and but lead ERP to marketing of made to look over the business couple for looking a drive the and for of up within administrative course last outside find the at We like launch and that. results. efficiencies system at year, that that the continue improve allow our structure better at labor things efficiencies the level expense of here technology and the also believe We opportunities, and store substantially our

and So, position the all be in profitably to the order positioned we rapidly make business grow in that -- customers, maturing continue of is sure -- ourselves be things the the to in for those position future. to for

Brian Nagel

Thanks a lot. Appreciate Okay. it.

Darren Lampert

Brian. Thanks

Operator

next Grey Please And will for a line your Global question Partners. from Mr. question. Alliance come Aaron ahead. open go with Grey. our is

Aaron Grey

question. was Hi. Hi. mute. Thanks Apologize, on the for I

So, I me. appreciate on brighter first question for dynamics. the the call

are One your different of these demand to as we just Oklahoma. larger some lower license the was, customers, states the mentioned of kind and you little California Northeast things bit be other or guys about of a structures coming think Michigan, than, online, from going

reliance there. be little I a on going more of bit think players of out a larger to there's some the

the some talk initiatives of the to to can able I think of of more the I about those other last Yes. the which the those some see from downturn you players, world, reliance York capture New growth Jersey, there? have license. So, because than believe, you be going but have There'll to you're three year. drove growth New a markets with in your now of Virginias lot so less of and

those just customers your and how with So, of kind some larger have evolved. initiatives you. those Thank of

Darren Lampert

represent commercial with country. cultivators of GrowGen, Yeah. the does around contact a very Aaron, we They're talented in them. many team large at the have that constant

out are rolling new We products constantly.

breed. that XXX right We best we light have an now believe eye to on is

now. benching a doing have company vertical racking We right

in do for to the shop we best we the and stop country centers have hand also time most now states. solution, new they larger of the So, But best of certainly, lot a do do cultivators hand these be we in these right around we are, in And with large the work best spend a most with around country. supply that licensing cultivators have the of service, the that cultivation dedicated looking country. one And reps service have in them.

Aaron Grey

reset That'd you three the online, five-year going initial these if currently going given and Okay. back to offset question appreciate look also And these license if just for given states those it. of through as these that that. you cycle that go from in buildout perspective, And even as the enough a such coming markets, Michigan, Great. Thank large as you're of to just a holds asked, five-year reset the your do makes would well base, at cycles? three think the that did be cycle, Thank to like taking some three then, set other it well kind other are seeing, everything so of up regulatory California, revenue think -- would you. be Oklahoma, you. to markets that structure

Darren Lampert

about One on of about now are is, XX% consumable non-consumable on it weekly the side individuals the it, need of it. the our basis. sales side a products that right daily, of consumable of And things, Aaron, the of of is XX% side

it, we that from of So pretty feel side comfortable.

efficient what the on products, or seeing products side to it, is the side of refresh reset energy control usually the On lighting of you're whether the dehumidification or coming market cycles, side it, new it. system of

half what really year a now. So, it's a and and right is, into And seeing now, probably we're it's in category. see that you're a wait -- over right that year,

we that So, lowest margin We we certainly be believe products more that the it. products to markets. believe and products there'll be rolling into there'll are new sell. out, our do coming money do back Non-consumable enough offset

higher While our margin base for a at us. consumable products are

seeing we're And we will believe said capture do we do coming and growth. And we comes in the you're is as believe board. label leases earlier, states we back positioned also Mississippi, private to believe So, we as that large see now Jersey we're now shares New that signing the right products. you recapture continues new GrowGen of growth right and in industry growth from its Virginia, now coming. well on And Missouri. do will right building What

midst in selling. believe We're XXX are middle Drip label over is markets middle that Hydro late May have launching or private an we -- the in We the Street that the of we of And look into SKUs, talking on nutrient forward successful about to it to our earnings -- been next product. early to line going we phenomenal call. Wall feedback on lines, extremely the has be the

Aaron Grey

All the jump right. into for I'll comment. ahead Great. and queue. go Thanks the back

Operator

question next Carter will from come Andrew Our Stifel. with

Andrew Carter

evening. Good Thanks. Yeah.

back for implying to back this the million is So, $XX $XX nine, million -- absolute a increase.

understand going models our is Could squared But the just branch we final a relocation nine is much -- and much we away. get that how the things then off, the we each same-store couple M&A get in how first So, So, what's so numbers of new all second, next in base three revenue. the store also quarters? for the component. Thanks. can

Darren Lampert

Andrew -- yeah, Andrew. So,

that the our the into which year for acquisition business businesses the those year, MMI XXXX, in at XXXX. and your clear, well question as of to the end acquisition guidance -- are done that HRG, is calendar down a of calendar which as to we makes already the in So, order this there York, New we've break be M&A distribution is acquired the business that incorporated business, benches,

this network. us, don't expand additional not this that sense targets I'm are we assuming for lookout XXXX we us in XXXX. our -- additional acquisitions sorry We for any at we to point, the believe, always at -- on The point, opportunities are to -- make have -- acquisitions and any

have we However, any inside this at in time. point don't targets

Andrew Carter

Yeah. But when…

Darren Lampert

at look ahead, go no, the -- You Andrew.

Andrew Carter

incremental asking, How plan either what -- asking and there's I to That's the I'm a have much MMI, is was to M&A the for going the that nine going final I'm wrap what openings. say, plus you from the HRG. year be is new in store or months? embedded

Darren Lampert

Yeah.

we year, round at is way distributor. end refocusing XX millions. year, the we $X as -- plus it for look will we the add business really the stores, new low anticipate million our business of and with call that's today. same of MMI openings minus to double-digit new business on in or with anticipate at us. for markets $XX store that disclose to for about but on calendar retail revenue that million, after And openings, calendar HRG conversion our virgin $XX We is we to million revenue for that MMI stores attention depending the So, the the reduction in XX The the have total the

Andrew Carter

you. Thank Okay.

Second question had filing mean, lot is, revisions. second this here know delayed you've the been a is I there's ask would I of guidance I and

But or you like You're another ask round is row Thanks. of investment, issue with. would need out you with is, to that something anything another go, something an guess there I systems the like not or I alone. can help us

Darren Lampert

we've making appreciate and I patience that. been your those So, Andrew, already investments, on

for us, of fairly filing and a and business, moving effort on from tell of obviously business matured detail the filer the year, year, any that, impact a at then, at to I to marginal large have status time adds the the end close you to process. delays future we're the the We in and quarters. we've and in end complexity a the calendar -- substantially quarters, can added which the the accelerated calendar as we accelerated don't further anticipate

up the we couple days and we're working the complex we've the a on needed that quarter, anticipate done past half. But that don't finish with just launch further we even and in notably that This will we dramatically things out combinations future some In anticipate over most earlier summer, the extra next to turn that and XXXX, getting ability delays conjunction get we're to in our improve business year any the of the with quarters, today. week. results than that out what over

Andrew Carter

Thanks. I'll pass it on.

Operator

now [Operator ROTH from Fortune Instructions] take We Scott Capital. with a question

Scott Fortune

sizing there's but much of California. is, great, which with from losing is -- makes saw obviously sales kind you seeing how are -- we you that years in tough Obviously, as us, Colorado, California saw kind base put perspective look those base, there, a downturn in this customers from look How of as from environment but in or you it of you the right do and going California? store returning XX%, back, afternoon. how and from about store think remind Good standpoint? you California, current of more you in in a the just the at you come XX then California here, perspective put you your put signals -- can environment? on do maybe store stores -- base that in cultivators or kind related Are you is in you of it And said back shrunk We'll correcting Yeah. no Colorado, was California that fine some out is or four little but a shrink downturn that focus the the kind of business?

Darren Lampert

are out Southern Northern California. Yeah. spread There Scott, between I'll pretty XX and California start. stores are California

XXXX. Most come We concentration may certain a in take our a in hard still stores are we always have play into we from on And basis. that -- by quarter in of certain -- quarter take look California areas consolidation profitable.

coming, springtime and outdoor spring. out happens have think planting California in cut is California of harder tremendously we'll stores the Summer through the is season markets. after I what in the costs coming very so the spring season -- -- California A take We summer in our see is growing. are areas Northern sensor a look lot we

gotten tremendous the in haven't a on outdoor still season we So, handle California.

So, we're still looking.

in percentage business is business. California of right now, low-XXs Our the our

too our California. was Oklahoma larger to really consolidation right we other discuss it's Michigan now, But The markets. spoke I of part about the in and of just think stores out early some

Scott Fortune

inflation know in be a label private M&A, obviously How -- initiatives And then trade like at and from just kind the seeing looking price it. that How private has trade nutrient color are you you on seeing I side? potential, maybe down and Got And it the to on your side to or you're label are benefiting opportunities of side. little with for the are environment that and still down there, customers customers still? you the private challenges them? kind side a some but the any things? but provide of the of opportunity, seeing M&A label affecting great anything side that

Darren Lampert

are I of that which we product A is a Hydro, think, have launching are of GrowGen. label Drip private now, right from midst in-house in growing. brands as comes lot come earlier spoke our them from the

are we both last brands we Our products, Power Si Charcoir which bought year, purchased performing two MMI, and this year. well. the

interesting GrowGen hydroponic year HRG XXX locations into HRG. GrowGen One country. distribution the Charcoir Si, we're this for of Power for was the purchases selling the that was around company

second products GrowGen distribute to -- other pricing best We HRG the in of products be happening using breed be label believe country. later into will we quarter. private around best That'll products. and So, the stores

into third the get quarter. we'll certainly also be in going handle Drip And stores, third we a call. into So, a for will better distributing quarter other starting that Hydro,

Scott Fortune

how or with pressures the trading of they you the on customers good. That's customer seeing down are right kind inflation now? -- react Any going

Darren Lampert

our Charcoir pricing product. premium a -- private is of our product on Our is products, some label probably

our And so, is products. Power Si

right GrowGen So of really are products -- lot premium a products now.

the in pricing But competitively the off XXXX, very distributors Ion vendors, tremendous on priced side down it's stores. lighting is And come Lighting and a decent from had has market. a Ion from Our XXXX. and to from

So, that right now. at you've $XXX trading $X,XXX seen lights are

side So seen country. in you the around have come of competitive stores with the down pricing market the

Scott Fortune

the Thanks appreciate Okay. jump the back really Darren. queue. I color. I'll in

Operator

next Mattson Our question Glenn will with come Thalmann. from Ladenburg

Glenn Mattson

for the taking question. Hi. Thanks Yeah.

just the and into you are that the chance balance sheet. you I'm comfortable Can on obsolesce any inventory and go at all? inventory potential with the about how thinking So, for

Darren Lampert

to obsolescence basis. that the quarter, position regular every continue We the of of on perspective We and analysis in and product, in specific we review cost make our place reserves market have that address lower programs programs have to we're slow with And product, comfortable we is promotional do no have that to a place we a do on that the sure starting to concerns marketing and that on down. from front. we move

Glenn Mattson

the to by year? of end of days in of in dollar inventory an working course absolute number get or to And of terms the down target year number a there the the terms is number that want you of over

Darren Lampert

internally continuing out neck target which can there a of year our to and inventory what our past, focused I in put we've a inventory. to seen turnover hesitant to we're our down turns was similar four I'm that get inventory a for on levels drive back numbers. say Yeah. that specific is the to on

competitive improving we're our have on time, available that the make and product service at sure to our the the marketplace. we have customers making for the that customers, we that sure focused we're the but So, in for and selection same turns,

basis. on those issues customers balance we're So, and long-term want make between to the it's two taking of sure a a care we

and of the that. capabilities change there We being to for our financial want don't have customers we

Glenn Mattson

or -- one are extremely asked accounts. demand of least early anything markets are there on already else or in Northeast states, Darren, Right. necessarily a who Oklahoma California like your I the think guys not the commercial lower are When big large biggest that. you mentioned from about like someone many about, who at people

can -- of -- the you when So, and proportionally? some market give little a participate how be confidence that this about the kind investors country cannabis you turning of lifting that you think level corner you'll the can part of bit,

Darren Lampert

Yeah.

service I always to for share known answer we've Glenn our state country we've that participated best we've having think fair in. easy solutions, is, got the the that in well and always plus every probably around -- been the best We're supply products.

and best out -- So there. the commercial team

our in won't back continue So, no dominance why East. states I other reason see

and We in and Massachusetts. have a very Island, Rhode strong in presence in also Maine right now

So, I Jersey up Coast. and no New doesn't up into see continue reason straight that New why York, the

Glenn Mattson

All right.

sum Som asset biggest is here. with level, far somewhat reduced your far I inventory sheet balance you're this one, if then, cash been CapEx asset. the guess, a just has what but I'll me your I'm getting up comfortable let as And by which -- it at as --

I you're cash inventory. So, as off you year to with some EBITDA. would end work said reasonable theoretically better you of that going operations believe off amount than And the be of cash

Darren Lampert

That's correct.

Glenn Mattson

generally, decent some -- the thoughts towards with Thanks. back guess the showing that? ask and year company in move this for a the making still because market That's buyback I potentially in you're ability faith significant and more a are do for a is, it or to of question about Board, where down stock of sort cash. bounce just rarely me. it's share the the with investing but Darren, that something -- with So, it I your to level end And question, going realize the I what like in

Darren Lampert

Yeah.

it's Board like their it. opinions discuss a a for for -- on always think question will now. But rather at certainly else, and I personal the right Board. look has I'd the will question it Board not always GrowGen Everyone stock anything stock people are on view buybacks of the make unsure where rational weakness, it. at plenty of use markets. cash, and sometimes, right especially now a look it into of in not the best there But that we'll decision is --

see. it'll for else, shall Glenn, be Board we a anything question and the like So,

Operator

hear now with Street will We Meyers Lake Instructions] [Operator Capital Markets. from Ryan

Ryan Meyers

Thanks question. guys. my Yes. taking Hi, for

me. Just one for

look So, you XX have that stores of many open, already you the to identified? guys do these of how to geographies XX specific

Darren Lampert

Right and Redding. now, Ardmore, we also We've in in done we've store reloads have Oklahoma. opened a Auburn --

will have lease It's We in operational as built in signed being Mississippi. June. we The a store be speak.

coming We Missouri, have lease New Virginia, Jersey. up and signings in

constantly we signing we leases have So, are have looking premises and we the on. areas, are right around now. country that and specific we And

be that fourth. now, our have So, we've three we the answer will Mississippi done. right

which have three to three bring and lease signings up coming up, seven. you We

Ryan Meyers

guys. Thanks Great.

Operator

I'd our And turn conference any back questions or it at are like no there to the over closing additional further time. for appears remarks. this speakers to

Darren Lampert

our you employees. And thank appreciate hopefully the everyone some of for news call you every day. our each do shareholders, sharing better quarter to Thank up thank to to on we you August. everything in you on you. like I'd call one for look forward today. Thank second GrowGen -- We to our coming

Operator

does us. conference. that again, everyone joining conclude thanks today's And Ones for

disconnect. now may You

GrowGeneration (GRWG) 11 May 222022 Q1 Earnings call transcript