HYFM - Earnings call 4 2020 | Hydrofarm Holdings Group, Inc.

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Hydrofarm Holdings Group Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, March 30, 2021. I would now like to turn the call over to Mr. Fitzhugh Taylor, Managing Director at ICR to begin.

Fitzhugh Taylor

Thank you, Victor, and good afternoon, everyone. call and Bill Officer. John the Chief Chairman on Officer; Executive Lindeman, me today Toler, is and With Chief Financial now, after access earnings have everyone fourth By XXXX quarter to release close. market our today issued should If of -- not, of section www.hydrofarm.com. the at it on website Investors available is the Hydrofarm's

to on performance, please put begin These not are and forward-looking refer remarks, our uncertainties These and and financial you that today our differ not our a could note materially you the of them. future should condition. discussion what therefore, cause we reliance also recent Before numerous formal will We impact actual are discussion risks undue expect. detailed statements operating filings guarantees could that for results risks our subject more future we include results to SEC statements. statements from of all forward-looking of to that

today's useful not we in discuss call, information should or non-GAAP be Lastly, our will of additional which presentation prepared over as evaluating The in isolation measures, we for Bill? this and that, available during be like considered can a believe release. With reconciliations the our results GAAP Toler. measures substitute with are accordance to in turn to I'd to earnings in Bill call comparable GAAP, performance.

William Toler

topics the successful on I'm Hydrofarm's several to very that, we and business discuss After to our and fourth year update earnings a provide call today well everyone. you, We'd on our overview update detail a speaking public our with on outlook. to long-term in current up It's going of you on quarter growth. We today's be afternoon, for why progress. like Hydrofarm's financial of are good pleased enjoyed you first review you strategies questions. Thank key we with call brief results we'll XXXX financial more as Fitz, great will December open for positioned you to call. to in our are cover all with John highlights, be and company. believe and full a IPO begin

pleased We with of XXXX cap QX over off top growth XX%. successful are line to a

In our COVID. to each the sequentially inventory and in position, restock connection of team's largely quarters, XXXX in our across growth increased with rate industries rebuild chain many supply following fact, during felt of effort our delays extensive

growth and diverse were strong as realized was Our proprietary, across product our and in growth pleased and We all see brand preferred that XXXX broad all the geographies we across to growth lines we categories. essentially distributed serve. in of our also

During XXXX, EBITDA, we in also improvement initiatives more implemented $XX shown million by increased the increase to adjusted sales to a points X,XXX basis of percent profitability. than significantly representing as our best to is net which of over dramatic several year. in compared XXXX, management prior enhance an This our the

at all environment, of very proud I'm XXXX, what accomplished, about accomplished inventory challenged our bullish restocking even and of I'm COVID term. while near-term long team both more such by communities working keep future, grappling a and and safe. team customers remotely, to Our with our part while many and And teammates, Hydrofarm presented also supply has our challenges doing as this in the

few Hydrofarm. a that you excited at with about me share me the here Let opportunity growth drivers have

plants environment momentum the and productive. agriculture, CEA, of of reflects Quite that equipment you more dynamics that of Hydrofarm fast-growing supplies, or controlled serving market. category one leading vegetables upside. of favorable, and know is Many our and products cultivation are hydroponic indoor distributors simply, the manufacturers and make the First, growing quite sales Hydrofarm's fruits,

more believe, by the early CEA crops, farming and And chemical I within help number and highly is sustainable key efficient one, still in while changes category; which, in land yield the the color on humidity, of turn, number with better ESG delivers impact over light the curve, no practices. nutrients. innings This, technology in U.S.; number and here customers legislative two, to ongoing including their greater water innovation, use growth farming a runoff. pesticides of conservation, the COX, brand enable initiatives, lower and category, temperature, fertilizer three, and efficient a significant power extend and control use, products time, from virtually Our variables, brought these doing fresh intensity, so

during New XXXX passage several Montana York further the week, state should Arizona, elections, November Dakota. plan in in there spur finalized most of actions new lawmakers Jersey, the cannabis that there cannabis to states, legalize recent adult-use were including South significant recently, as just the And adult-use well. products, for In as New fact, demand such legislative our and last

should states, that of not While legal expanding and finalizing cannabis. almost demand. XX% markets the new even inventory in key does to capacity each everyone state resides individual is that the their still building plans, serve we implementation I several still population state recent in are actions the access a expected in warehouse with these surge remind U.S. adult-use And have of to

ago. I'm mature new substantially significant Oregon and to XX% of our the we all adult-use which own say our at and a line states legislation more will than CEA momentum quarters very start the And performance XXXX, our strong add adult-use of states XXXX. both sales X continued customer realized propelled years In X last growth in company the greater in of These pleased has top the at pace. growth to Maine, of like XXXX than of dynamics some Lastly, base. passed more California,

which represents are Second, the brand in brands, growth. innovation particularly our continue around own, building, opportunity. proprietary key committed to Innovation building, will that in brand drive brands we to growth we our a

forward. and on Phantom. and in-house control XX% brands. by our competitors, brands attributes. are And product therefore, and of of going categories more which preferred bulk PHOTOBIO Proprietary our number own build sales our better Developed and We squarely to destiny, on in this third that have is margins a we great development we by of growth our the team is more of in little proprietary focused key than the drive outperform combined proprietary. their look increasing brands our against light PHOTOBIO key example LED extensively across competition parties the penetration. A all by own lights innovation-driven of our tested new product provide

at but many the traction quickly folks insight -- their you the seeing team brand, innovation sales in in of gives on one Our on that building, some here farm careers. the the focused have leadership it we're and entire entire PHOTOBIO approach mobilized of the That's and behind new their marketplace. example, something only to excellent the across brand team

portfolio. our The a growth preferred history, way, company's strategy is what year third to industry taken as strategic in brands. XX-plus we symbiotic Through element has our Hydrofarm the in pride add and brands strategically refer preferred in to our to our aligned and powerful brands relationships with distribution

FoxFarm, acquire most the in Over in key announced recently, agreement fourth and last the CEA few Nutrients, to years, Advanced in strategy value-enhancing businesses. portfolio. of distribution Anden, respected to one pillar an exclusive Aurora with added February preferred Innovations, the space. The our nutrient our growth in is More like we've others brands this largest Canada partners Aptus year, we

IPO, the during help now we businesses. in have Coming is M&A namely capitalized already of are X proprietary to the nutrients over acquiring transactions John internal done those of our who businesses. top acquire XXX Development, are and a we an know grow CEA and we myself entire media our And product our while value-enhancing those is met we you that Between well-constructed roadshow keen of strong don't combined where opportunities out we or we businesses have and team categories categories. you prospectus, to interest Corporate across For brands, have that to buy well Head read and our IPO our careers. us in priority have are of the spectrum, in open

We to M&A to EBITDA about to have you targets a Many accretive have hope of that of tell mid-year. are built businesses ours. funnel these margins before something carry strong potential and

and for this So moving us we on forward, look progress. we forward a strategy our updating to think is you viable

the infrastructure. the in we reinvesting our also XX% to see our results to industry, expect our integration position and also John fourth but expand making about to pursue and a rapid preparations larger growth. I'll earlier in As customer own we by strategies me and benefit from let service XXXX, growth some footprint we're company growth In distribution Q&A, Hydrofarm our relocating our guidance. expected organic organic more by our expanding to our business existing parts new for to acquisitions, We're size we provide Though and adding position base. shape facilities. moment we DC further rejoin and turn all operation stay that in our with line in the top want handle a growth to a John? in XXXX, of can and existing footprint outlined of financial a quarter coming discuss robust platform long-term it better over XXXX ahead to for our

B. John Lindeman

good everyone. and Bill, Thanks, afternoon,

results growth fourth pleased quarter with and our significant ahead. are the We opportunities

million through on of Now from let quarter, fourth $XX.X in me a which with period. sales, net quarter the the $XX.X increased prior to for brief walk XXXX in million start the year XX.X%

finished and proprietary serve, in XX.X% release, Growth was that and excess our should California, that year-over-year brand saw the the we top including preferred proprietary with quarter, also sales. virtually and diverse. of in and XX% quarter growth plus was both the just the earnings it total groups, consolidated brands of over was Oklahoma, line volume-driven, dominantly As broad states, noted several geography our far basis. Oregon grew achieved a year add, we I up we and in representing full growth XXXX preferred in meaningfully Though the in across together, we on such strong every

pleased further mix we XXXX. with made progress anticipate are we the shift a in favorable XXXX, in While sales

items, with from also gross inventory and SKU that profit to the we favorable gross quarter higher impacted the quarter, nearly a also to same in profit the earlier, from compared XX.X%. by including the $XX dramatic of increase adjustments of period described last sales XX.X% fourth and in improved the was mix negatively saw fourth million The more driven quarter In rationalization the connection combination to year, write-offs XXXX. but year-over-year and sales resulted margin tripled

we QX are did should costs the pleased higher that I gross realize quarter. we freight of we with at the in beginning While margin, in had than note overall estimated improvement XXX-point profit the

$XX are as related on December. in was we general IPO largest fourth portion move XXXX. Selling, well costs as So the of as stock-based quarter the of freight keeping to was SG&A, in increase incremental million by the quarter expenses, into in million and compared administrative naturally, XXXX. fourth product eye to our we an in triggered compensation XXXX of SG&A The expense $XX.X

prospectus, IPO we the estimated $X middle million the will million. read For in to those range. roughly came who of indeed, you at recall of $X you And that this we amount that in

comp SG&A sales and sales versus XX.X% net period. expense, depreciation or of million the prior Excluding of was $XX.X XX.X% XX.X% stock-based amortization net in or and QX in

quarter relative which impact million average note quarter and for structure, we its XXXX the per XXXX period. Please that $XX.X were per another year to diluted was Weighted further in quarter So $XX of XXXX. Net this prior count -- our we realized million the adjusted or capital shares have IPO million our on operating calculated is forma applied share the net diluted compared the diluted our precise non-GAAP release the of this share which million in the changes we helpful prior $X.XX calculation be also the additional to for of neither in income the to and for is comparison reconciliation the To approximately We in for this XXXX. weighted income $XX.X diluted of diluted significant occurred if in was measure year on quarter share to for loss non-GAAP last XXXX, improve January average at in and on or IPO per comparing and of net $X.XX period. the measures. adjusted per beginning fourth XXXX approximately earnings in $X.X a page compared quarter And fourth leverage to shares comparative the IPO, mid-December basis, The had $X.XX pro intend that outstanding earliest basis, information approximately XXXX. is periods. loss net forma the million account detailed $XX.X contained -- outstanding pro as share. the pro loss metric forma full XXXX, or closed of reflects fourth forma believe pro diluted can containing

higher earlier. sales net million loss to increase period. the The XXXX for positive higher $XX.X X.X% from or in increased million prior EBITDA adjusted relates Lastly, a $X to of fourth we on of of big the the all profit the fact. for adjusted sales, turning quarter a XXXX described year gross of and point ways, is number in reflective SG&A leverage our and margin EBITDA a this company was believe

sheet our $X outstanding. and balance at of December XX, capital had in only on further debt This to unrestricted strong million new overall and $XX.X position, Moving interest-bearing total position liquidity our credit XXXX, million and cash facility. equivalents enhanced by in cash year-end is we as

Just yesterday, credit on facility, our expand a $XX can we request. closed revolving to upon signed new million and which million $XX

and base our advantages, acquisitions a flexibility our a Chase to our good lower and with While we practices. added including a facility calculation, favorable rate, borrowing new very prior marketing enjoyed lender, advertising borrowing for respect a provision carries relationship effective permitted JPMorgan numerous with credit more

We complete the on balance and from the as addition investor as company I in point the exercise sheet credit investor warrant liquidity, this additional conversation cash million of credit $XX are equity overall capital really warrants new by should excited out relationship. To anticipates much to receiving new holders. facility, in also to the also that our begin future our

the described time expect until stock registration do are IPO further to the investor company certain under company files warrants. the the the not to As that exercised such likely warrants investor prospectus, be common a in warrants statement investor to Further, underlying conditions. right call we register as the the has

do of control of element the have exercise investor the we worth some over warrants. noting of that it's timing Finally, these

up open for you lines with Before let quickly review we the XXXX outlook. questions, me our

net to growth XXXX. just in are December QX our XXXX in to growth XX% we million QX As Bill for expect sales in strong of that XXXX. XX% and million $XX this of we full noted start we adjusted now EBITDA on the growth fact, rate sales start, And to earlier, we off organic to a are be the strong part estimating for to period ending rate in Based XX-month experienced period. similar same $XX

as half tell strong my expect can second particularly Given you fourth growth earlier in the to in XXXX half we XXXX to periods the comparable the stronger of relative we comments, begin quarter. third first and from lap

the continuing across mix may the that commodity the We to XXXX. and guidance. that expect sales our our our XXXX proprietary themes initiatives drive of in though sales demand as leverage and growth expenses by CEA increases increasing do in price industry, the with will broader brand be expansion EBITDA by industry margin on SG&A implied proportion some we dominantly drive volume-driven adjusted result in anticipate We in during operating inflation our to result our conjunction cost preferred anticipate will

investing relate select Lastly, let outlook, few comment assumptions a earlier platform. me Bill's XXXX in on about of touch which several our in to directly our

put impact of approximately to P&L, which front XXXX than ease both year expansion million, incremental we that million in of extra First, the expense. $X but we the investment, estimating any expenses facility contemplated, acquisitions. aggressive half as pure this additional planning footprint in the of organic is see of us previously and future needed more $X rent/lease now to approximately integration XXXX of volume to space are growth also in you heard, expected comprised growth, the terms are primarily a speed of DC should we This coming, building means which

additional of one million. that $X not this public release, million we $X company out the call I and expense Second, should note did costs in earnings line is to

benefits compliant SOX incremental to from And in IT to further float effort finally, $X.X need existing to of we inside scale earlier our of growth-oriented plan. our increasing million the cover distribution expenditures value which and IT-related expense, planned capital enact With facility well now our XXX(b) which XXXX, public capital expansion IPO built result spend our for XXXX price, approximately fully audit have may significantly the million in as referenced we be $X.X system. as consulting may our now into

of the magnitude execute in questions prepared address it. This have. and up Operator, you our and we you open As opportunity you the we our to reporting questions? for to see, on progress front against about the of forward remarks, look as to we are now any excited remain we want can happy us, may concludes lines

Operator

Our Instructions] with [Operator first Stifel. question from Carter Andrew comes

W. Andrew Carter

are guess, couple I kind year? still wanted expansion also, for the maybe are the the on -- I to you And input a building to going questions. kind looking hone in of And cost absorb because gross to there. of impacting And be inflation just in on input cost expecting -- ways of you that your start, nonexclusive might I'll as Will one, I margins? affect, pricing? having number delay you you that? out as any there inventory of are far stop are guess China, more some brands, margin

B. John Lindeman

on one, lock first, any things. can like. things, roughly really perspective, Obviously, I'll Andrew, for manner. in right? that and color helped we don't in in is our Yes. our costs. cost really couple Bill with covered have carriers a in looking in just transportation X given in and the A we freight cost fuel cost, LTL add operations, area cost about mitigate that the of there. product we think nature of increase on we've are mean, rates half distribution year some freight locked our control From he'd the if to We jump and freight I and of this hone I think, then costs, that

a that But we'll number positions some of transportation What we be a for We're harder the us, months' to primarily SKUs. make we like products SKUs, X perspective, delays -- today on with do into meaning different make longer may large worth and thousands given a dealing may have distributor position a should the that. From finished for goods. is average lock will And set, -- take take we purchasing otherwise costs. inventory SKU so there's a to be sure everyone, do rising that nature to that fact broad the supply in, little our of X of it's we, ample in cost slightly we're product come picture.

the way it. So to manage which that's we really try in

is And in piece third of costs, extent the in industry. which the pricing our may continued of the I to think the as Obviously, notes industry. handle in we earlier, course, see some an of referenced how it, I conversation we our -- see we just that rising across

W. Andrew Carter

kind Got then Has done with into of the I opportunities? acquisition terms it. that there very the the in of kind stars it that eyes because conversations of there? And kind environment and obviously, guess, question, gone Or guess conversely, cost still pre-IPO that? targets of potential like GrowGen's might harder Or catalyze excitement it made -- in second I input or their public, you've might is putting well. since inflation anything that feed

William Toler

question. Good Yes.

on time be people and well, more are in ways, all I what's to that. space prime are very it's many our a trading and of this industry and very going so in the competitors us part people the of think cottage GrowGen anxious a certainly, I space. into And some that with excited think brought about

but bigger worth working always we're a are looks certainly their now they worth how being of think with saying probably now in people of there's it think that. the lot and see to I benefit something yes, mean validate of platform, smaller folks is part through they thought I a and was the -- what business that these businesses that

pressure different out a certainly there's of there's of opportunities upward there. And Andrew, it's lot So lack such industry, but there a is fragmented choices. no because little prices a paid, on good

move of being lot So unreasonable, or the and find brands to choice opportunities there's #X, into to somebody is good on can choice add if #X you portfolio. a that

Operator

from Our Securities. comes with question Truist Chappell next Bill

William Chappell

Or and caught the fourth on anything we than like up had left and in it's the question, orders. stronger now? feel I constraints certainly strong terms I of guess, was meeting you mean expected, first do quarter, but table? capacity fully at you're looking there

William Toler

bit was PHOTOBIOs and gotten really but particularly -- Now QX, the up catching table, to would that. we they came on on keep the We've earnest we're that we category they in and lighting. left categories in of touch here. a that building basis, now a hope so in QX in in, October, we in one but our actually from to category by And a in weaker they think our say and came recover lighting I

William Chappell

it's can X And in they've one my where little more existing technology a full about a is or guess the bought new that I bit it. is and what the throw talk are year just have Because lot understanding worth customers of just past PHOTOBIO? to out willing you refresh a years because

I mean terms can pretty on years? over sales And a us what is more give -- lighting little of color in this maybe so this few you a means next the

William Toler

have product. We Yes. it of terms impact product that couple out PHOTOBIO well tested positioned performance the the against actual in competition. the sort brand actually that are think actual of well with now and a years spent got on working very the and of of we We've very now a

take great the brand, selling great further. other us and brand store is has take partners folks PHOTOBIO now which expand XX-year both So as the into our and retail there. to a in brand, well category, into it spot I our for it relationships lighting think a as good we're Phantom been our places. it But leadership a opportunity are in And out really and

we want now last So But in having very the of year, are COVID with course, we where to good we spot things now and other be. development. challenges slowed a we're some down after think

William Chappell

-- it But you early just right in something it's to think orders move is where your for. numbers to cooling? you're then just a were tell? wrong now half Or too at now and that above nothing the slowdown And back seeing we guidance and one, there's of you're certainly is looking with or and comparisons a terms we last as there what it. again, Got looking

William Toler

part, latter A little that of bit Bill.

started we QX the in up -- Your XX% about over in QX QX. then fairly then and XX% year, year slow out and XX% last up and

So this to and QX, pretty point. then quarters started lapping strong QX early, that's going daunting plus-XX% pretty and we're in we lap and those at

in conservative we've smart soon And right As very to feel and sort we this kind we bought about be March and not from going early of mid- call why moving it. And would of along, XX% everybody heavy that none and little beyond about year COVID, all of XX% see year, to as that as really is starting something, little of bring us the but said happen. we're the buying, April, at what we're And I lap heaviest we a until a see thing go momentum. And good the momentum. QX were a if to now, out. try such where there's least XX%, we're we'll it which yet number to last forward industry in that's more ready would call, all and sort we're of a to to an bit improvement, late sure ago it but

going to out, and and year-on-year is you'll going keep as will little a QX, well. different. here QX it's to So QX. hopefully, I period And the very, absolute this in X- QX very strong think But see a smooth X-week

Operator

next Bank. Kevin comes Our Marek from with question Deutsche

Kevin Marek

XXXX those as and a from EBITDA whether improvement kind big to is you talk then that you size of and over the is can of step on that if the of look pieces I out we pieces them? guidance take margin based moving sustainable period multiyear think at levels. improvement the wondering, basis about just up I'm So back, XX a midpoint points, think, the

B. John Lindeman

main the drivers be topics. Kevin, I the X to Yes. really, X mean, continue

we've shift think on is stay tried mix. I on the just and one the to product course in

and XXXX. higher spoken even gross Our over some as earlier, margin carry proprietary acquisitions that improvement our that to up. to we've made and natural drive preferred We think a on to without margin. opportunity in us affect We tend for there's continue about really brands, XXXX

SG&A, talking improvement think in part piece the The SG&A. do and I That's about making margin in speak that incremental excluding the the of would -- some is operating this also we next when amortization few implicit comp. the EBITDA in leverage we our in space. relative 'XX And other leverage see. experienced incremental the of really reason over in are We XXXX called about we'll stock-based depreciation, we investment really, the it, out prepared with have I some say we SG&A, remarks XXXX. on I'm to what you adjusted additional believe, DC and benefit is years, it is there's particularly

are work I our up our that as XX% that front. And excluding can part way, things last targeted quickly positive we've area way So think the for as an we all longer-term into. think we that think we margins business, acquisitions, -- of kind fairly about on this X% to we of EBITDA margin range by question, the sorry, I'm do we your thought think

So end that I out think back frames -- of the that your hopefully question.

Kevin Marek

proprietary Or kind you're as guys about I going have just the to of Do helpful. however a follow-up, think expectation target trying I That's an about then of in you And or maybe XXXX? frame out, for of XX% north preferred guess Yes. to brands able talked think XXXX. being a to sales it? how answer further question, you just

B. John Lindeman

targeting of look that's I'm sensitive without you, acquisitions, something tell And us that land that was acquisitions. competitive think as below could Yes. do we I is mean, to really sort with to something a in. XX% that XX%. a the right I'd is XX% XXXX, now about change moved we're north from -- always We from talking I this look, one as the into to should we -- of area looking mention to mid-XX%, XX% ZIP we're code dramatically. this, No, number Everything standpoint. a we'll

Operator

JPMorgan. next Andrea Our question Instructions] Teixeira [Operator comes with from

Andrea Teixeira

if you. can you I questions for just I have X think --

per you capita was said states. If the And stake you can consumption against can what's I cultivation? cannabis those the additional in embedded recall elaborate adult-use states more legalizing in nonlegal it higher obviously correctly, and guidance had multiples, your if for

So the platforms. if second if on time typical the the increased you see share you that sorry, for just talk -- question, DMI also I'm consumption line can a there? And can wondering you

if on So over Sure. the from and evolving time you're comment can the you seeing commercial how customers XX%? that

William Toler

few states, some in the increases use. high on of Arizona. the to most early got been months small We're seeing one the been of X of literally aggressive relatively you've at legalized dollars trying first the Andrea, percentage adult implement They've with Yes. sort of that's out newly XXXX.

longer are sort to of little New they're taking going the others Jersey and implement. some out way to a the

So we from there. haven't seen as much

So ton volume in there be -- picture. the right? XX it isn't of to for into explicit new really you'd used yes, them that volume to come plan guidance states, see before learned months We our the a XX

supply supply a work platform us are DMI handful the of allow take very marketing more and them customers adding, customers. commercial. sort us it's commercial worry a talking to that. lot with a the traction the these selling, a got formidable scheduled of and worry call We're tool But X, week, business. And not we That's try of that second is commercial very momentum mostly They in we've been to we by with a it, be now number that, is Many X them of that of moving partner our it's ourselves question, been them of about that the helping about to of driven to really them. do to Now your We've and good out guidance chain. get hands, growing inventory, delivery, just-in-time to to XX. ahead or like mostly plan and run use to get the rate, for on in. chain their in

above Andrea, a So commercial of now, certainly It's yes, group that right the subset DMI on along, moving is that percentage. and a as XX% total nice that. is

Operator

Our next from Blair. question with Andersen William comes Jon

Jon Andersen

capabilities different that that high how on kind business that capability along talk and guess off quarter they it And to strong you customers. on to up Bill you a feel over need Andrea congrats what you far of takes the where pick Are you of out serve maybe you John, different? just requirements I'll build of commercial a there commercial the your have -- Are from today? a Are or little standpoint more aspect on I to maybe part touch? are about gates. customers? left right time? bit are Can scale

William Toler

retail still Yes. that offerings X/X what we It's probably X/X sell. the and yes, pieces them next strategic and of pretty consultative quickly, there. that developing the layouts with done way goes environment. much have services larger quarters. would in and would think of different a to hope them over is We or area. equipment should and We're have I our I I going to versus and of and more what store few we're call sell into HVAC there a But the suite don't full it in could larger have

you're different if And build takes commercial them so supply it a sales work longer you I work or switching to while a a from take either months a new with cycle. a generally mean also do good through do in that. on several to situation, way. It's different

a to taken very very really a different while was the and entire kind history. the team It's XX-year-plus sale. capability because build historically its it's very, for us So Hydrofarm retail-oriented of

are question. good There are a a that number it's different. yes, of things So

Jon Andersen

you're direction new you you relationships there only But in of good but into on translating kind as pointed it's it really like capability-wise, pretty about, out monthly feel basis. the sounds a a not that moving right

William Toler

by we're progress with it I'm I'm never is, much, the Yes, Jon. very encouraged enjoying. but satisfied always

us I'm here. to so for do anxious lot more And a

retail stores still there's incredible coin, frankly, traction states, side type our and if that But but growth there we're across there's you we states, huge would of sort I flip we're of legal market emerging learning say seeing just a addressing are I that out on lot the do. And the it. just serving and a independent address almost not all of think more in geography, just how same to every to that in just world not in the newly hobbyist, country, that in will.

are us the growing, stores is think are the we're one out. any such of building category I commercials states -- anybody that's new total numbers ever are that out that than thought. addressable And people the of all this growing, TAM, far the in market, that of retail larger reasons the incredible is seeing

measure, All of us probably a really it's and that lot speaks market to of any to on. it of larger is than this can a go fun lot take

Jon Andersen

commentary legal was at the have interesting of are I a you a it prepared excess was Agreed. now. in been those point, company-wide. Agreed. in And while states that grew -- think Oklahoma, rate for to Oregon, that that the I to hear California XX% for all

for years strong mean So drive we've what to such there? are That I California in where legal been seeing several now? you continues growth.

William Toler

the in Yes. X of think I spectrum. ends seeing specifically, I California, mean you're

by the into of you're the many You're hobbyist are side, the any other influences. now store a bothered seeing can which they getting some seeing growth. renewal shifting comfortable almost high-pressure sodium outside LEDs, equipment And not commercial retail from back the be away of grow plus very and getting lighting you're you're

of so And That's Oklahoma it's West. states didn't in And of sort hard. fastest-growing of truly said been is lot was and out isn't Wild have around it right? You quote there states or group, size. fastest-growing in for mentioned one absolute think but this but are folks what a all very, been that and oftentimes are while, years category. they've for us in And you're even of working I a greater, growing -- X of Oregon, states Oklahoma, we that in industry, top group Oklahoma top entire our sort for the the ends California a we very states you that. is and both the And getting exact all Wild, said, though numbers and the rapidly, we Maine, of also

Jon Andersen

towards it that it doing customers, up trying that on also keep bit support of plans service more Last there? oriented of up. sense faster cetera? your tell your is just for to color is making moving you the And interesting. can will there revisions can element It's market in the to or more When Yes. to take get a to effect? you're and the et Or about you satisfy expectations DMI demand? related footprint. What a one what us me, you're some probably little demand, around it's kind for Obviously, your

William Toler

Portland, Jon, all, it's a of next We're in demand bigger Demand, Cal really already the expectation Santa the of few one. larger right? Northern and demand to expectation-driven. In and into Oregon a larger a X That's I facility miles another that. into M&A in a facility M&A, process our York first the that newer going Fe John facility, our off facility. take moved east today, months pressure East, to next to of New Springs, number you a we've of we're got going mostly facility. moving where up the open and when are X months, and Jersey L.A., some we're New now DC of probably moving

great a a service But to some those of have the big we're markets, pressure facility with take need -- Philadelphia. that off in probably We support outside to facility going in right to Southeast.

the well. really footprint be that evolving. as bringing we'll purely in expectation the So that's that's businesses and But demand it's some

Operator

Teixeira with is from JPMorgan. Andrea Our question next

Andrea Teixeira

And correctly, little the earlier, if any we sure it that that, you're you and going the want disruptions bit September this in that touched can you like of understood that of from if So chain on don't forward? come quarters, also supply more there mentioned lumpiness to but lights the comfortable talk you major in June the we expect all you should some quarters? terms also, I China, of your make see about cadence a

William Toler

position one, that yes, But then given much flexibility the sheet I'll have can has into leaned take post-IPO the and on and John we inventory balance stronger comment company cadence. Yes. lighting, ability. and on us lighting our

excited and market. And the the about the we're of way about inventory seeing lights lights on so results the we also lots of having sell, in have lots to and are

place So very they're such the catch years media and just suppliers year and are up mostly suppliers, we're up. last and catching off of to still cases, still to many categories, in coming there. The on are us, trying grow some solidly good frankly, nutrient inventory strong that the them

side. And brands and probably the equipment And So these we'll in hopefully, table now, on category that's little able soon. our bit up that pretty on side we a will left guys have catch stock the to own hopefully, be lighting the the there.

B. John Lindeman

the just X growth of the And from first Yes. your basis a to my moderated One a year. just perspective kind the in first a comments, year higher expecting of of of quarters, rate maybe year-over-year question, the ways. across is address and bit part faster this on second the and of it of I'll reference the prepared we little or in half half but a are growth growth is more

evolve do we on out I call suggests we and when that across and a hesitate the think of should it. year that span we to as change front, something won't the see

and do front. seen terms be expect In QX, the absolute on of just QX, a bit that years from what little not and dollars, X QX over fiscal to last you've we higher dissimilar QX to than us

Operator

questions at back remarks. turn the closing any I'd over for time. to Toler this There Bill no floor to like are further

William Toler

We Thank being you touch Take to I forward you. appreciate folks. a back Thank you, all, care. Great. in being our call. look part of first soon.

Operator

concludes web this conference. gentlemen, and today's Ladies

your this great lines a Thank You may now time. your participation, day. you at for disconnect and have

Hydrofarm (HYFM) 30 Mar 212020 Q4 Earnings call transcript