GRWG - Earnings call transcript Q3 2024

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Operator

Hello, everyone, and welcome to GrowGeneration's Third Quarter 2024 Earnings Conference Call. My name is Lovely, and I will be your operator for today's call. [Operator Instructions] This conference call is being recorded, and a replay of today's call will be available on the Investor Relations section of GrowGeneration website. I will now hand the call over to Phil Carlson with KCSA for introductions and the reading of the safe harbor statement. Please go ahead.

Phil Carlson

Thank you, and welcome, everyone, to GrowGeneration's third quarter 2024 earnings results conference call. issued Darren Chief and company's Financial earnings release are and Executive third today closed press Sanders, market Greg Officer was us Lampert, Chief Co-Founder Officer; quarter today. With the after of GrowGeneration. The of which A Safe made the Relations Private copy XXXX. include on the at would this section on everyone Harbor remind statements, website Investor like GrowGeneration call of to Reform release are the that Litigation available the Act press ir.growgeneration.com. I this provisions subject is to of certain Securities forward-looking comments of statements. and are concerning to These on that to in forward-looking statements based and forward-looking from risks events management's could subject current are materially expectations actual results described differ beliefs and cause uncertainties future those several these press other today. to results in or SEC to of any and forward-looking discussion detailed of refer expressed with made a materially risks filings that cause Please the the implied from those for today's could the differ actual release statements

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

We will to be prepared to Following management remarks, you take ask your please question one happy follow-up. questions. and that one yourself limit

allows If you time will us. have as additional questions, them please reenter we the queue take and

Lampert. Darren, ahead. will call Co-Founder go the CEO, over please hand I Darren GrowGeneration's Now to and

Darren Lampert

made towards restructuring the our Thanks, appreciate met to reflecting particular, performance. I'm our pleased our consistent results In expectations, solid that as progress our Phil, joining quarter internal and and details third sustainable enhancing afternoon, positioning shortly. Throughout driving our targets look efficiency, plan. our we closures good same-store XXXX. operational everyone. on We we as provide of with report today quarter, our you all targets and under brand share we've growth us store were which and GrowGeneration product the on for we with focused I will sales remain proprietary we for performance, exceeded offerings

has also thanks instrumental, I the commitment not dedication. We for team's making my believe initiatives only and an entire their springboard to extend strengthen we're a emphasis want improvements a will on but them will with Our today foundational been current hard work our brands, that digital and and growth to as high-margin for serve leaner, resales efficient performance, proprietary our expansion, footprint. more

million as restructuring Our results third net had in second quarter plan. slightly our revenue of as $XX anticipated quarter part $XX.X of down of closures store included to million, XXXX, we from the due

execute growth. We on our margins growth enhance should as are These efficiencies profitable, increase to areas commercial focus organization. profitability we BXB sales our with are in customers high-growth we They as us and balancing sustainable optimize across for GrowGen revenue initiatives. on our actions enable and our positioning key

dynamics. with pleased the goals to focus. of with launch which we to portal, plan a lineup which customer products and our briefly footprint in brand who focus account we transformation the will streamline $XX to bring brands continue launching reduce XX the to with sales and profitability major XX% customers. Two, are operations throughout on that BXB announced GrowGen's for expect XX X are: current includes expenses entire organization and This and next components our proprietary third brands basis. I'll the by of the proprietary a adding digital retail of during products One, Further, by quarter, focus for our continuing total align quarter. Three, fourth to we our of a XXXX. of of recap annualized and We with improve minimum on an to our progress e-commerce rightsizing believe end sales million these market restructuring a our actions months best-of-breed the approximately these partners on BXB preferred new over to

locations, to areas. sales We force our customers of been and our these commercial commercial the progress majority retain expect making the substantial all to across adjacent BXB portal. We've

stated, order we included the to in closures closing the best-performing Since locations volumes. that customer already X serving also stores spoke, higher our closed. have been plan last previously we stores have occurred. prioritize XX When additional XX store time, As noted

note the store positive in core by retains high want deeper little Digging As same-store quarter to our of sales same-store the this we performance highlight and sales XX years. a is shows today, the this marks of of behind quarter paramount reinforces that rationale the of importance locations results, growth our our to first third X grew We company plan. think stores. XX.X%. into restructuring It our operational

third proprietary results strength also the of Our our brands. quarter display

As a grew Cultivation driven proprietary This by sales, of and several last XX.X%, net from percentage new brands Gardening launches up sales growth to year. mainly was the during quarter. XX.X% product

of target XX% proprietary track new to and our we're high-value differentiated contribute GrowGeneration. products end margins innovative reach us Our the customer on This proprietary of XXXX. total and by portfolio for brands pipeline consistent is growing provide our stronger central brands to enabling of strong products, strategy, to sales performing of that proprietary to offerings comprising meet needs of a profitability

customers. our across embracing a of transformation, sales BXB approach fully a focus with digital-first on strong our our part strategic As channels are we

product e-commerce we access to which for serve experience. will hub simplify progress BXB clients, pricing, launching as place a streamline designed set our to portal, enabling This recommendations new live made on quarter, This and platform our commercial real-time purchasing and availability seamlessly fourth view the central in their orders to online, substantial them all and quarter. tailored is go inventory

we we growth sharpen year and will on further a balance focus finish profitable and sheet. our into the As move XXXX, maintaining strong

of with position cash September $XX.X and Our as XX, million remains XXXX. no very debt solid

reserves position no-debt financial reflects cash Our resilience. our strong and

repurchased as value. an compelling of we stock during continue third equity We $X.X million our believe the has also to additional quarter

guidance. to on Moving

XXXX of estimate to million. year net full revenue million our $XXX reiterating are between We $XXX

of for actions light the in outlook cost restructuring and to adjusted our we EBITDA review savings resulting ongoing anticipate. We continue our

and have year would full XXXX brief a will provide year like greater net MMI, we to guidance now close to call. I expect update business. provide our solutions our and our revenue adjusted earnings We on on visibility EBITDA year-end when storage full results

is call believe and receiving when a will previously As we to evolving significant positioned strategic with discussed, and capitalize and the to upcoming there third further now show Greg? in provide bids. opportunity opportunities industry, business. expectations are is growth we and quarter any CFO, our assessing The GrowGen is Capital MMI, further in restructuring currently with of have monetize over process discussions appropriate. To our we Street the the related cannabis leadership this to Lake especially summarize, on industry pro-cannabis reviewing and the updates progress hand Greg stance our were process new measures. rescheduling consistent will ongoing, is results Sanders. of strategically opportunities. I the we to

Greg Sanders

and Thank afternoon, you, Darren, good everyone.

line as execute to plan. are continue We report the pleased to were that with our results guidance quarter we in third

XX.X% the a priorities. Starting X.X% $XX.X I million quarter was XX.X% cover impact results primarily improvement an in consolidated of same-store strategic closures growth, reduction expenses not $XX our company quarter, third in attributed net depth, in to the The As our to from year-over-year. million sales to same-store million closed additional metric increased report that sales last in sales by store and revenue retail proprietary XX period, demonstrates quarter. third decline in the satisfied $XX.X which overall will of our brand compared be year with sales. We alignment ago sales, the in revenue Sequentially, and stores had trailing XX could more on declined third XX months. quarter an to the

through turned strength full third the GrowGen, Oregon improvements of for and were challenges XX. Cultivation Gardening our same-store the positive sales for in X in California million net year-to-date sales this within and $XX.X Relative $XX quarter, million Michigan, quarter the September first of quarter and XXXX For sales markets the of and for the marks compared saw business third Oklahoma XXXX, Maine. years. We the adoption sales of to X.X% the sales This continued Harvest same-store to in delivering positive observed and Gardening XX% Company. third Cultivation from for sales including year to on remain compared in of be for market XXXX brands, our of continued to period. laser-focused proprietary was of to driven quarter driven comparable Proprietary quarter ago and a XXXX XX.X% the We third by brand the XX.X% improvement. increased Hydro Charcoir, Drip our brands. of proprietary fiscal

of profit period. the timing large was remained For for at XXXX. Net recognition to last margin point $X.X sales $X.X closures the million increase of XXXX retail inventory This of Storage stability. year's to the by flat incurred sales to compared of third sales indicator segment in within Within XX.X% XX Cultivation a the XXX to consumable Solutions generally margin, prior we quarter our to from we fixtures costs, freight revenue XX.X% XXXX quarter on the closed view related largely of store XX% various third third the product from million third of was and quarter. Gardening impact for as expenses third increased a quarter, the liquidation stores to quarter compared commercial of year, in segment and for basis due which positive XX.X% net percentage the the projects. Gross of

year. $XX discontinued mix the we to brand which a our to incurred our product XXX for QX, to of from XX% inventory to proprietary business inventory by sales the period. Within revising basis ability contributed next initiatives, million restructuring align in the our we discounted impact addition, reduce sales point In heavily also in are execute

quarter sustainably We allow well, to margin expect report XXXX. fourth impact business that gross percent profit higher will but on this into an initiative, quarter a carry the in the have will which fourth will as

realize $X.X expenses third million that XXXX. Meanwhile, steady expenses selling, strategic of million $XX.X and other to continue in is million for $X.X of noting XXXX, quarter $XX to and X.X% compared to declined the rationalization quarter million were as we worth general the compared XX.X% result in efforts. area in our Store the a administrative quarter third a the third to quarter operating improvement. in of expenses Another improvements

from is of model. was due largely million, restructuring to severances other second further quarter our operating optimize this the and SG&A While XXXX $X.X costs expenses of to slightly related up to

XXXX million compared December cost of of of business for through in beyond. Depreciation the as XXXX expect improvements and XXXX. set the which to quarter communicate at third to we position acceleration million in QX our restructuring additional $X the assets for expect certain to We retire increase is we due amortization from $X.X This quarter depreciable assets was second initiatives for XX. and year-end, to

in in which of quarter third compared loss XXXX quarter. Net addition, share release, we compared the stores to quarter In per loss period of a last was $X.XX share was $X.X the Adjusted million net negative third of recorded million leases negative $X.X in to for was or $XXX,XXX in defined as fully $X.X negative of year. per press XXXX. the our million related or negative third the EBITDA, same impairment, closed a $XX.X million $X.XX to

to Turning sheet. balance the

equivalents XX, debt. September no and of XXXX, million of As company cash, and marketable securities had the $XX.X cash

we to quarter, utilized shares. the million During $X.X company repurchase

We foresee strong near-term continue needs. to a and position do any not cash maintain financing

As range are the in guidance million full reiterating XXXX million. be $XXX net Darren year our mentioned, for to of we $XXX revenue to

We expect our for made position and profitability call. In year quarter. progress strong. long-term financial the restructuring on remains conference net XXXX in adjusted XXXX guidance the full to We revenue of third business closing, provide GrowGeneration towards EBITDA significant the for year-end

for expansion, cost positive margin is and reduction Our opportunities top line long-term growth. generating primary focus

We are the deliver closing to our dedicated profitable Darren business enabling the for growth remarks. leaner will a to footing, back shareholders. I us more for turn and call on over now sustainable growing to

Darren Lampert

everyone Thank today. you, for Greg, joining you to and thank us

on footing our up restructuring company. more forward. third optimize in and put wrap to to revenue build profitable us our path have The quarter progress made stronger I emphasize efforts through growth, drive we As GrowGeneration's margins excitement and we've call, leaner, want confidence a our a

we're footprint expanding momentum already high-margin maintaining Our transformation committed XXXX. advancing brands, this results, showing retail our streamlining and focus is proprietary into to and on our digital

please strategic confidence this GrowGeneration position for and plan, for vision. thank work team as entire and we forward keeping value I'm our for our progress shareholders we their investors We as more business. also line like deeply updated to deliver remarks. Operator, for to year. our remains grateful support success. open you resilient excited and adaptability the new a That We're dedicated into by meaningful I'd move to look and to our on on the to our concludes prepared in building Our long-term their executing sustainable questions. hard continued

Operator

Nagel Brian question line of [Operator Instructions] Your first from from the comes Oppenheimer.

Brian Nagel

of could. I couple questions, if A

numbers. just guess, First off, I

the respect want talked and when You picture. proprietary my then guess, which get seems kind to quick. How Could of the done? And you of that you're base as will could how with question, Darren, continued -- second about I the like you the introducing performance the the brands, us maybe some to same customers? to of different store to of be performance new and added it's brands, the appeal base. happening remind -- bigger your ongoing rationalization you But brands, the rollout customer is is build-out brands the that about quite products legacy sales or maybe adding you talk of versus are these new where

Darren Lampert

I Yes. can start, Brian.

stores XX right now. have We

you stores. year-over-year, We've down we're about from look XX So XX And we're XX year. stores. closed when down this stores

year. GrowGen not XX, we the industry. couple a next of go-to now may I right now now name GrowGen think changed cultivators. a is tremendously in close not that at to a we're right say stores spot we most has more as for evolve comfortable pretty this

stores the BXB the around network. certainly So not amount out as build out of and we country our we is distribution necessary build

the now right been to a months country. do closings years believe everything yards products the will to now and has right country we're our see private products our the takes be with locations. has through year going see a but store comfortable customers I label, around of around the together. from X now. the that it. With certainly GrowGen you're coming you'll We're cultivation last within service bigger couple But probably regards starting X So whole our locations, these more certain It it next sides X get to that of to in testing of right year, What R&D -- just spent on it different or is able of customers some different bringing certain whether industry, it, switch shovel and picks is be of ancillary market the it, our on the side products on a of to is on the side in to giving side we're And just of on side the us optionality. new which through feeding it. soil the nutrient of customers to Harvest really really on adopt testing our facilities plant it which Co, brand for and lighting of we're either more the -- the and side these

also now right And products. of our So distribution. customers some selling adopting our into it what you're seeing both is of also, we're

looking GrowGen increasing from both products I But of -- looking ends. products So margin lot a seeing we're XX% that really you picture think that to start low the sales on the when you're margin at at for XXs is opposed business, GrowGen, are selling. other you're some

manufacturers especially our XXs our XXXX the year looking our next of start we sales best-of-breed XXs, that of do we be with with in also, to we into believe XX% believe to distributors, working low work very their closely margins to you a should customers. of our that products. But So selling what label there will going balancing brands out the partners high seeing when land with of we're continue private that at -- and

our GrowGen for So for. customers. what choice. a we've we sell always always that And the products are some of choice said looking gives our to not our they're customers And

So with we sell. eye what open we keep a very

Operator

Partners. Grey comes question Aaron next line from Alliance of Global from Your the

Aaron Grey

just out opportunity. of about I players in some a your the wanted still me. MSOs. to terms So with larger for efforts increasing of there's first It sales to white your like the build question space sounds more lot in business, hear commercial

initiative any helpful that could be would you color So give there. on

Darren Lampert

amount evolves a it, ways, around gets there's and in of network we it's to where whether it's system our give commercialized products industry this a lot side And systems. products. But We whether whether products, think becomes either software credit other GrowGen vibrant on go-to, grows right we of our built now all GrowGen think a accounting of opportunity. albeit sell and it's I have the country or We've a product, I the at the accounting, customers. more up vendor as best-of-breed it's tremendous GrowGen very Aaron, Yes, whether distribution. credit,

our making I think credit best to So in fashion, easier this -- and for day products it's in shop. it's our just making a again, customers their pricing to about customers just it's it what and age, And that's timely with jobs easier. getting

Our accounting with bills department have anything work our very else, their consolidates from balance to facility sheet. customers. facility. We big Like we a

largest our have on in industry. cash of million we the $XX the now, positions Right have We sheet. inventory balance

So the and customers. to don't can XX/X our we what else, there sleep. anything orders plants And our sleep for like fill we're never do and customers

have the at we GrowGen. other commercial an it, On team side extremely talented of

Our new within to products is at team facilities. answering on helping coming daily market, out the a basis, grow issues commercial facilities questions the there's if about

our that at helping selling yield. helping again, now. quality only I industry helping again, par We're the not partners' GrowGen innovative we're we that them it's We're products So products. or have also customers, we're to through them in But is believe grow. team right our products a them with none with

Aaron Grey

color there, that Appreciate Darren.

for touched sales. label you, of me. know briefly well you for I to on XX% question Second private perform continues

that the drive mix going How quantify continue where down So higher much distribution. can have break of terms there about Could getting think versus being new you the expanded think guys help new said as and now, -- SKUs you you that we to products just products just it and about XX% we should to that is of drivers? driven us sales? in innovation legacy of and you by the maybe growth

Darren Lampert

still SKUs. legacy Most I look both, of it we Aaron. our of a combination Again, really as are SKUs think growing. at it's don't

told Most except market driving are for you're powders out whether the right talking products been innovative few the is mix starting beginning Charcoir in also about, Coco it's to not have Drip coming coco quickly Co. within also come it. Charcoir. and very really grow now, seeing come as and much have And of of as we are perlite Harvest sales, year we've market that to at XX-XX the there's Coins. But last legacy years you, a So to that with them

have our you're for market. seeing years, new a in seeing also coming to products So been that you're think few but products I growth out

of you'll we've mix. So a couple I that are years that launched don't a see believe stagnating. in think We products

all they're I think still growing.

I think division. of within much It's than label quarter. quarter the private you'll a was tracking nice higher see fourth growth our on number it last

next we attainable XX% still couple So you may from see we of years XXs the believe is believe that year. later. do And a there, it that in

be we are with product. on any couldn't we more again, So where private label excited the

I think it with certainly helps sales.

is it. division commercial out Our selling

individuals go to that We earlier said as facilitators. facility have Brian, I and managers to facilities,

we're business. stores, last be closing is the it now. really how there out know what than so building hard and we And I years the we're spent And a future. to GrowGen, working close XX we of stores And our restructuring half right you stores, think on any believe more wave the X XX

be tremendously So different believe, than XXXX, a year we will XXXX.

Operator

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

Eric Des Lauriers

are very here. all and on My progress questions growth the nice portal. BXB the on restructuring Congrats sales same-store

is discussed BXB your know -- gross a is BXB new kind a more see that portal we a you that of mean, inventory this you of there a portal? more thinking getting should high centralized are like I e-commerce a or expansion First approach? And maybe could here mean, bit one, on availability adopting this what from this ultimately, and just Or expand just I what's be portal if revenue previous guess, already. more of wondering I initiative? But by this sort few times company-wide capabilities. to you've level. margin simplified some incremental opportunities pricing overall, I I'm this at approach of is, as and of more

Greg Sanders

our Eric, of lot products. will with. customers on different give up and Yes, pricing It pricing. quite to start schedules commercial hard We're for it it's a opening them have I both, Again, think different our it. individual to worked customers we've

have our our team. through it, commercial manual, on commercial when you'll customers, you'll now, go hand-driven. to very order have pricing they individuals Right availability. it's And So want

our a the And so to They'll take it's portal know pricing products what really to pressure off going now right that's is. the are. know where They'll staff. of going

staff to facilities look new our time give will to for go much to our customers. it So work more to with customers

you So unless like it's anything the we of have industries. tremendously, don't believe most that's industry order they needed. questions, than else. mean maturing usually that's Individuals salespeople. go they they through and online and is wave in I They and have the salespeople. see direct commercial that it's their The don't future something order nothing different

It's think it's side be it's color we GrowGen X.X, -- We And So coming in again, it's and us margins increase just will the of be stock, use. will products so easier. they that need. And it our business. what just we properly for it. to way because these order, places The I it's It's finding the much different customers products it I ease giving it be know where believe transact the customers, for will products in, need enjoy will more easier much GrowGen products. -- are should much know shipping to the it. of what's other just have on --

starting we're what for it, for BXB individual of size side other open growers. the we're also also portals products any is doing to On up

our -- products. websites will And other where to online the opposed going to they and growers up, be So direct it to looking they'll customers. go within They'll how also individual use can teachings learn products open country. through having again, our websites, to many

Eric Des Lauriers

That's all very helpful color.

want it. margin for not reasonable you or us an exact a basis, kind if number, however business, EBITDA brick-and-mortar to should with understand so of difference margin I margin the BXB the of potential yet, you maybe I'm GrowGen I Obviously, think this can know launched opportunity haven't we how and take but think portal in margin? a here, about whether guess, on gross you the more looking X.X range, this that help terms if of versus we In traditional that's guys

more Just help us from bit portal. color this BXB of give with of perspective you wondering if a a what margin you're can anticipating kind

Darren Lampert

see Yes, do margin you're Eric, manually by things more need cost I customers again, Manual, GrowGen. we both our do to than side, to savings, think employees more and to going to portals. on the we

So price, into stores individuals shipping whether I our think coming same are will the products out or be for them the selling of warehouses.

still it's GrowGen determined. But dealing be products. So to we're once again, with

as Our opposed other the higher. are They're proprietary brands, the XXs margins in opposed XXs brands to the it's or to teens. certainly whether as in

you'll in we inventory a these at through million quarter, of products down the XXXX selling tremendously to get ready we of So you with see or low store inventory a loss the XXs lot bringing even third a a for in believe high -- XXXX -- I balancing to third that really our will of during margins in products XXs. And lot sold that quarter going think $XX forward closures. unpack and again, our the whether it's rationalize be if quarter, of the margins all

Operator

Mark Instructions] [Operator Street Smith Mr. question the Lake comes from next Capital And line the from of Markets.

Mark Smith

how Darren, first shifting the were over is the still is you to base? question of helped comp what the around to retain? Any really that are stores. just for stores drive these customer idea And able is that some from of retention customers closed comp much in me

Darren Lampert

in in walk-ins. weak see quarter one walk-in are is was very store surprise we sales starting But very that said that sales GrowGen. year, always will that believe we the opening now, and retain continue. We the It is, last nice are will certainly majority ship reasons especially was believe at third much same-store starting small of that same-store a portals certainly Mark. I make GrowGen. customers a not to for them of stores a to we XX.X% whether in to we that is a Street turn their we think closures. lives believe we these the from -- easier. commercial will right customers But Wall What quarter the to we that retain closed, we the certainly we're customers, industry do off it but growth for

should complete behind believe to forward us. year. it end by we have the months, we that the of We and we So look of restructuring getting couple still most another the have of

X forward XXXX. We sharing last XX stores we within So in did the close stores months. look close did really stores. I span -- all in X-month the all We our progress XX X to mean, and

hard at feel customers. work, to go-forward pretty basis. pretty been now where on but we sales are are brands, we are with and starting retain They a our buying we've same-store comfortable we So right

Mark Smith

Perfect. seeing trying can seeing in to feel kind how the like as that, of health today? bit, habits, kind what customers back give of are industry we And commercial to your of little walk-in doing, you that a kind customers and it just get the is follow-up into and you here? you're do and feel about the of you hinted of are investments operations talked spending grow for a which operations a and health to What your us anything and -- today,

Darren Lampert

-- our we're receivables collecting receivables. are been positives The have

little that's very for We areas, so certain also are in a GrowGen. getting increasing receivables, issues but paid always positive having with

we under industry see, we're the forward they still President-elect tough It's to money Trump will and We're look off are wrote can sledding of years we on customers we haven't nothing that the gotten in some a state many receivables. looking when to last we think We're said back that in you conservative raised on front, things positive change government. from very but don't. But And -- is you the pretty X turning done. laws. at has try legislative believes time he that. little -- he last believe Every always comes long-standing years. extremely haven't been by you couple with -- a As the the Democratic it has regime been state and tough. taken to ways, There's help. The news

state optimistic a out Act, it government bring state. by rescheduling, cautiously the we're it's whether whether We it So do industry, and it's money SAFE lot of whether believe the of ways. it's different into leaving in the it staying will back

out So me, been we very sledding have if it's tough ask you there.

a kept believe to the think but navigated not place we performance we've road. it the in that will of happy right our wonderfully. now, forward. We've certainly down stock go the balance sheet price of Certainly I great take care that with

just We share $X point stock. was much repurchase. believe we of stock that back trading make a We bought our it that So where sense. our just at finished didn't million

going again, we go year So finished very in optimistic last where we've years of done into we're we of in and the couple -- the the what future.

Operator

Darren time. Mr. There Please at continue, are no questions Lampert. this more

Darren Lampert

you for updating today, look shareholders and healthy Thank with forward all upcoming you on season. I starting closing look joining on and Thank our and happy thank us progress to the you our Well, strength. a you. year we for employees We and holiday year-end call. XXXX attending forward wish to our today.

Operator

call. gentlemen, conference and Thank you this Ladies concludes today's your for participation.

You may now disconnect.

GrowGeneration (GRWG) 12 Nov 242024 Q3 Earnings call transcript