Q1 2021 GrowGeneration Corp Earnings Call
Good morning, My name is.
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You're welcome.
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The ground.
After the Speakers' remarks, there will be.
Session.
Asking the question.
John.
Hello.
To withdraw your question please.
Thank you Mr. Mike of Sheldon you may begin your top of threats.
Good morning.
My name is Mike Lasalle and the co founder and President of Cogeneration and.
At this time I would like to welcome everyone to the grow generation first quarter 2021 earnings conference call with me this morning, and Dan Lampert, our CEO and co founder and Jeff Lasher, Our Chief Financial Officer, and Tony Zone.
Our chief operating officer the wall.
All the participants on our call this morning.
After management's remarks, there will be at the analyst Q&A session.
As always we expect to make forward looking statements. This morning.
But I want to caution you that our actual results could differ materially from what we say here.
Such statements can be identified by the terms such as believe.
And Ted and Matt.
You may not place undue reliance on forward looking statements.
Actual results may differ materially from these forward looking statements and we do not undertake any obligation to update any forward looking statements we make today.
For more information about factors that may.
May cause actual results to differ materially from forward looking statements. Please refer to the press release, we issued yesterday as well as risks and uncertainties included in the section under the caption risk factors and management's discussion and analysis of financial.
Condition and results of operations and our annual report on form 10-K filed with the SEC and any subsequent form 10, Qs and form 8-K filed with the SEC.
Legislation is opening more space to grow more plants and at the.
The national level of all eyes are focused on Congress and the new administration that seems to be making it easier for people to cultivate.
Legally and obtain the ability of the bank nationally.
And the first quarter of 2021, three New States, New York, Virginia, and New Mexico, legalize cannabis for adult use and bringing the total of the 18 states.
And what sets grow Jeff part is our focus on selection and service and solutions for our customers and our leadership in the industry comps from our relentless focus on customer service for all of our customers from.
On Kraft growers to delivering end to end solutions for large commercial operators.
Controlled environment.
Agriculture is emerging as the most efficient sustainable and scalable and bad debt the graph of all types of plants.
Controlling your environment is critical to the indoor growers success.
<unk> continues to lead.
The fully stock on.
And finally garden centers vesting and technology supply chain Omni channel solutions, and the employment of the largest contingent of growth from professionals and the U S.
Our first quarter record results were achieved all of these through the relentless efforts of the <unk>.
The team of professionals and our industry and the strength of our supply chain. We have built and are built and are committed to provide the best of breed and latest innovative products to our customers the bacon right and.
The highest quality plants and the market.
I will now turn the call over to Darren who will present, our first quarter 2021 results.
Thank you Michael.
Good morning, and welcome to our first quarter of 2021 earnings call.
Before I begin with my prepared remarks about the quarter I'd like to thank each and every one of our staff and customers for their hard work dedication and loyalty.
The company generated revenue of $90 million and the quarter, a 173% increase year over year with the 51% increase and same store sales.
The company earned <unk> 10 per share on a record GAAP net income of $6 1 million.
The record adjusted EBITDA was over $11 million for first quarter of 2021 versus $2 4 million for.
The first quarter of 2020, and the increase of 364% over the same quarter last year.
As we continue to expand our operations and serve more customers. We are increasing fiscal year 2021 revenue guidance to $450 million to $470 million and increasing adjusted EBITDA guidance for 2021% to 54% to $58 million.
The first quarter was very busy for us and that pace has not abated.
Added 14, new locations year to date and plan to acquire at least six additional stores that represent the best and market operations.
Additionally, we plan to the Greenfield six new locations this year in markets, such as California, Mississippi, Oklahoma, New York and New Jersey.
That would bring our total location count to at least 65 at the end of 2021 and.
And we remain on target.
Chief over 100 locations by 2023.
And the first quarter, we had over 100000 walk in customers per month sort of Hydroponic garden centers, our ecommerce channel grew 126% the $4 4 million in the quarter versus $1 9 million for the same period last year.
E Commerce transactions were up almost three times for over 17000 transactions and 2020.
Fair to 6000, 302019, and attracted over $1 2 million and unique visitors to grow generation Dot com.
We continue to see strong growth coming from our e-commerce websites.
We continue to focus on margin expansion strategies that include further rig the deployment of more private label products acquisitions of proprietary products and driving more efficiencies at the purchasing level as we continue the scale and grow top line revenue.
Our private label sales were $5 6 million and the first quarter 2021, representing six 2% of our overall revenue despite the port delays and supply chain interruptions.
As we have said before we plan to derive the projected 10% of our revenue from our private label product offerings for full year of 2021.
Over the past six months, we acquired two of our industry's top selling product brands.
<unk> sigh of silicic asset enriched additive and chart for the highest grade cocoa core substrate available on the market today with the special growing cocoa cube that is revolutionizing the growing industry.
Both of these proprietary brands are now fully integrated into our supply chain and are expected to contribute well over $10 billion each in revenue and 2021.
In addition, our March 19, 2021, the company purchased the business the business Web site <unk> Dot I O a leading agricultural portal that allows commercial growers to manage the of purchasing and logistics and one platform.
Our best in class staff is now over 600 with over 500 of our teammates experienced growth for us.
We have created the largest sales team of hydroponic product specialists and the country.
Our steadfast focus on rapid strategic growth and key markets, both organically and through acquisitions has resulted in a record revenue and EBITDA.
With 900000 square feet of retail and warehouse space grows and continues to build the largest chain of Super Hydroponic Garden centers and the U S debt service commercial retail and craft growers.
We expect new acquisitions, and new store openings to continue through the remainder of 2021 that will continue to drive growth and help us achieve our planned 65 plus locations and 2021.
<unk> has a tremendous team of essential employees, who have made a commitment to our company and customers and it could not be any proud of it.
I'm inspired by their efforts and dedication as they have worked tirelessly to service our customers and communities.
I will now turn the call over to Tony Sullivan, Our Chief operating Officer, who will brief everyone on our key operating initiatives executed in the first quarter of 2021, and then turn the call to our CFO, Jeff Lasher, who will provide more financial details on our first quarter 2021.
The results Tony.
Thank you Darren.
We had another successful quarter with the record financial results.
We are very proud of our team's continued growth execution and performance in Q1 of 2021.
As Darren stated, we currently operate 53 locations across 12 states.
Our team is now over 600 across our multiple divisions, including retail and commercial and ecommerce.
Key operating initiatives and accomplishments and our first quarter.
Acquisitions and integrations.
Darin spoke about our completed acquisitions and our ongoing acquisition pipeline.
We have developed a documented and consistent team approach to acquisitions and the integration of these companies we are purchasing.
Our approach includes inventory valuation and analysis Onboarding training and transitioning our new team members and all system service and the Sop training.
Our proven process allows us to close multiple transactions in any given month and book revenue on the day of closing.
Okay.
At the time, we help our newest customers leverage our scale to improve customer service and efficiencies as they adopt the grow Gen model.
We have developed a real estate and two year growth strategy that is targeting the best of breed acquisitions and greenfield opportunities throughout the U S.
We are building a hub multi channel fulfillment and spoke model to better serve the rapid growth, we are experiencing and our industry.
At the same time, we are building a multi channel supply chain for direct fulfillment.
Product transfer of Sandy grow Gen location.
And support for our growing private label business.
Our supply chain currently spans 900000 square feet of retail and warehouse space across 53 locations and 12 states.
Today, we operate distribution and fulfillment out of our 60000 square foot location, and Sacramento, California and.
And 40000 square foot location and Tulsa, Oklahoma.
On March 9th of 2021, we announced and additional 52000 square feet and downtown L. A and.
And 70000 square feet and long Beach, California.
That will serve as our distribution and fulfillment locations for the company.
We are in the process of building several additional locations that will serve as fulfillment centers that include 25000 square feet and Phoenix, Arizona.
And 58000 square feet and medley, Florida.
We expect these locations to be contributing by summer of 2021.
Omni channel and new website.
The grow generation Dot Com, we are currently testing buy online pickup and store solutions as we wrap up the final development and launch our new site in May.
In addition, as stated earlier <unk> is fully integrated and to grow Jens the operations and exceeding our expectations.
Private label, our newest product offerings are exceeding our expectations and our expansion is underway with six 2% of overall revenue coming from private label in the first quarter of 2021.
And our multiple private label products range from nutrients to lighting controllers and other gardening accessories.
SKU rationalization and store plan of ground project.
As a retailer SKU rationalization and store planning remain the constant source of focus and improvement.
We anticipate significant learnings and data to improve our inventory turns and optimization profitability and the in store consistency.
Our mission as a company is the offer the widest selection of the best of breed hydroponic products and the market. So the grow Gen becomes the best one stop shopping destination for all types of growers.
I'll now turn it over to Jeff Lasher, our CFO to review our financial highlights Jeff. Thank.
Thank you Tony.
Darren previously discussed revenue for the quarter was $90 million compared to $33 million last year and increase of $57 million for.
173%.
The increase in revenues is primarily attributable to a $41 $4 million increase and revenue related to the stores acquired during 2020.
And since the beginning of this year.
And an increase of $14 $5 million from same store sales as we grew from $28 5 million to $43 million and 22 locations opened for the same period in 2020 and and 2021.
Gross profit margin was 28, 2% for the quarter up 110 basis points from prior year.
Driving this margin expansion was an increase in revenues from both private label products and distributed products, which were six 2% of revenues for the quarter compared to less than 1% of revenues for the same period last year.
Gross profit dollar generation was up 184% from prior year on increased revenue and margin expansion.
Store operating costs totaled $8 $2 million for the quarter compared to $3 6 million for last year.
And increase of $4 $5 million for 125%.
That was driven by the 173% increase and revenues and the addition of 25 locations we.
We did increased selling general and administrative costs by about $3 $1 million to support the enterprise growth, but share based compensation, partially offset that increase.
The expense associated with share based comp decreased $2 $8 million due to timing of awards in 2020.
Net income for the quarter was $6 1 million compared to a net loss of approximately $2 1 million for the same period in 2020.
Net income was 10 cents per share.
Cash used in acquisitions totaled $39 3 million and.
And capital investments and operational needs totaled $2 7 million.
Adjusted EBITDA was $11 $1 million for the quarter compared to $2 4 million.
In 2020 and increase of four six times for the quarter last year.
Share count at present is $58 eight 3 million shares and we estimate that weighted average shares on a fully diluted basis at the end of Q2 will be 61 million shares and.
And Q1 shares issued in connection with business combinations was 548000.
We utilize shares and the acquisition activity to incentivize management of the targets to become long term partners of the company as Darren discussed we estimate that revenue for the year will be between 450 and $470 million based on 53 retail operations.
And our planned openings and two per priority for proprietary brands that we own.
We estimate that EBITDA adjusted for share based compensation with those operations will be between 54 and $58 million.
Along with our new stores that we are and the process of constructing we have multiple garden centers that we may acquire and 2021, which upon closing will impact revenue guidance and increase our store count from 53 to 65 by year end.
Now I'd like to turn the call back the Darren for concluding remarks before Q&A. Thank.
Thank you Jeff.
Grow generation is now built the foundation for tremendous growth for the next several decades to come.
And our store acquisitions, and new store openings continue to drive growth as same store sales results were 51% for Q1 2021.
As to the same period last year today, we own and operate 53 locations with our growth initiatives, we will increase our store accounts to over 65 locations by year end.
ROE generation has built the national.
Supply chain for the agricultural and cannabis industry.
Our leadership position is driven through our corporate mission statement to be the largest chain of hydroponic garden centers and North America.
We continue to invest and our supply chain and technology, creating more efficiencies across all departments, providing our customers with the product they want.
And where they want and when they need them.
As we look into the future. We think there are tremendous opportunities to add to our network through the acquisition of independent retailers and open and Greenfield location and new markets to meet expanding customer demand.
We look forward to continue to provide guidance as need be and we're excited to share our successes with our shareholders. Our management team and partners now we would like to turn the call over to the operator to answer a few questions.
Thank you Les.
Ladies and gentlemen, who will now begin the question and answer session.
Should you have any questions. Please for ice.
Followed by one on your Touchtone phone.
You will hear later brown and acknowledging the request of your questions, we'll be bold and the or did you receive should you wish you the Glenn from the bowling prices.
Deutsch, John followed like too if youre on.
And the speaker phone please lift your handset would be from breast and any keys.
One moment for your first question.
The first question comes from Mark Smith with Lake Street Capital Mark. Please go ahead.
Hi.
Thanks for the update on guidance just wondering if you can give us a little more insight there on kind of what's built into of Jeff. If you can just reiterate a little bit of of your commentary at the end and then maybe Darren Phil.
Philosophically, how youre looking at.
At your guidance if you feel like this is a little more aggressive guidance or any insights that you have into the guidance would be great.
Yeah sure sure Mark This is Darren I'll take the I'll take this question.
<unk> for the year of $450 million of $470 million.
<unk> 53 current locations and additional new store openings, and La long Beach, Mississippi, and Ardmore, Oklahoma, which would bring it up to 57 stores. Currently we're guiding to 65 stores all additional store openings specific potential acquisitions will be updated on the.
We are of very healthy pipeline going forward. We believe we can close up to another $100 million of the acquisitions and the remainder of 2021. So as we close these acquisitions youll see us updating guidance on a quarterly basis.
Excellent and then just looking at the.
Green field stores.
Talk a little bit about the.
And the opportunity there and the outlook and maybe the cadence and timing of little bit of when do you expect to get these open.
Yes. So mark this is Tony I'll take that question, we have a documented two year real estate strategy and a five year targeted outlook.
We will be green fielding stores and emerging markets and states legalize.
We will be back filling and targeted existing markets and in the near term will be opening as Darin of shared with you in La and New York, New Jersey, Illinois.
Homer and Mississippi This year and the stated we're planning the end of the year round 65 stores and by the end of 2023 of 100 plus stores.
Okay.
And if we look at just the the.
Opportunity within the is how you feel about returns on Greenfield versus acquisition I guess, maybe looking at most of it.
The good example of returns on Greenfield do you think these new stores can do similar numbers to what what we've seen out of Oklahoma.
You don't work right now we do we are looking right now on the Mississippi markets. It's a little early right now youre going to see one more vote in front of the Supreme Court and the next month or two but youre still youre looking right now and Mississippi with very open and licensing rules at least debt that's what's being proposed right now so pretty soon.
The Oklahoma <unk> residents of requirements.
Very inexpensive licensing. So you are seeing pretty open licensing. So we believe the Mississippi market will be very much like the Oklahoma market Youre seeing some of the early.
Talks coming out.
And with craft licensing of 50% of the licensing going to the underrepresented.
Every favorable homegrown rules and we do believe for with the certainly with New York opening up licensing. We believe you may see a sea change on the <unk>.
So as of May start looking like the west coast. So we couldnt be any more excited youll see us and the New York markets and the next six weeks and I do believe you'll see us and the Illinois market and the next six weeks also so you're going to start seeing growth and expanding into new states and again continuing to build and the more mature states that we're in we still we still see true.
Men this opportunity and states that were transacting business in California.
See tremendous opportunity left and Michigan right now we're in the midst of the Greenfield and another store in Oklahoma as we speak.
So again, we see the industry expanding at such a tremendous rates of this decade, and the kind of equates right now when youre looking at the compounded at compounded annual growth rates that you are hearing in this industry, 20% through this decade going from $20 billion up to 100 billion.
We're going to be the leader and right now grow Jay and is certainly growing quicker than the industry.
And there is less restrictions for us to open stores on the state by state basis, Theres less competition for grow generation and we will we also represent the homegrown was the craft growers the caregivers the single state operators and the multi state operators. So youre seeing a tremendous tremendous group of individuals that grow Jen.
As represented.
And Thats why youre seeing over 100000 individuals walking through it.
Of course for us.
Adding quickly right now.
Great. Thank you guys.
Yes.
Thank you Mark.
Thank you.
Your next question comes from Andrew Carter with Stifel. Andrew. Please go ahead.
Hey, Thanks, good morning.
I wanted to ask about the EBITDA margin guidance for the year.
The range of 12, 3% you achieved 12, 3% and <unk> 21, which is typically been your weakest kind of margin quarter for the year. So I wanted to ask about the phasing of the margin throughout the remainder of the cheap.
And of the year in terms of any growing and any headwinds, we should consider or potential constraints around inflation balanced against some growing margin tailwind you. Thanks.
Yeah, Andrew right now, we're being very very conservative with margin guidance and also EBITDA guidance.
First quarter has been normally are slow are our weakest EBITDA and margin quarter, and we are seeing tremendous headway headwinds with the port congestion and certainly shipping inflation commodity inflation. So we're taking a very conservative approach. We do believe our margins will be going higher this year and our.
EBITDA margins, but with all of the headwinds going on right now, we're taking a conservative approach, leaving and a 12.3, but we do again, we're confident that hopefully we eclipse those numbers.
Great and then the final question I wanted to ask about one of the more prominent.
The issue of the labor shortages and labor labor inflation the concern.
<unk> for specialty retail and hospitality can you comment on kind of guidance.
Conversely, and through largely insulated from these pressures.
Yes, so Andrew I'll take that question. So when you look at it.
Put it into the into two buckets, one is from a labor standpoint.
Have a two pronged approach one is our grow pros and our support.
And we have a strong strength strong bench strength program developing from within and targeting and hiring and bringing aboard.
Have additional <unk>.
Talent for growth, but most importantly.
Because of the talent that we bring aboard and because of the industry we offer benefits.
Yeah for bonus we offer centralized support so our wages have been very competitive and our benefits have been.
Above and beyond as we operate better in these marketplaces.
Thanks, I'll pass it on.
Thank you <unk>.
Next question comes from Brian <unk> with Oppenheimer, Brian. Please go ahead.
And good morning, congratulations on a really nice quarter.
Thank you Brian.
A couple of questions I'll run through here just first off.
Again, we saw the results and Q1, and then and the updates the guidance, but any comments you want to make on this business and so far here and the second quarter, particularly given that you and the economy broadly starting to begin to lap lap past. Some of this initial disruption with the with the COVID-19 crisis.
Yes, Brian and simple terms the industry remains strong and <unk> business remains strong.
Okay.
And then.
The other maybe of longer term question, but you've.
And you've done a great job it really quickly building building out this company through organic means and acquisitions.
As we look at the continued prospects for continued strong sales growth both through 'twenty, one day and beyond.
The key infrastructure type investments or moves you have to make the support that type of growth.
And I'm going to turn it over to Tony Brian.
Yes, so Brian.
We have been making significant investments and the.
The technology infrastructure and foundation and more importantly, we are now bringing in the talent proven talent, both internally and externally to build this business out and create the scalable strategy that we're going to need to go to a $1 billion and beyond.
Got it.
And on that front, Jeff welcome to the company and look forward to working with you congrats everyone.
Alright. Thank you. Thank you.
Thank you thank you, Brian and Chris.
Your next question comes from Eric <unk> with Craig Hallum, Eric. Please go ahead.
Great. Thanks for taking my questions guys and congrats on the.
You had another impressive quarter here.
I wanted to drill into.
The sort of store pipeline here, you mentioned of $100 million and potential acquisitions later this year and of course, the numerous greenfield opportunities.
Could you give us a sense of.
And the size of the stores on the square footage basis that are within that acquisition pipeline and how.
How that varies too.
The size of the stores that you plan on opening from of Greenfield perspective, and then sort of just as a follow up to that and you look towards that 100 store guide.
And by the end of 2023 do you have sort of the blended.
Blended average from the square footage basis.
How large you'd like the starts debate.
Hey, Eric This is Michael I'll take the first part of that call for that question when we acquire.
Stores were looking at it from not just square footage. We're looking we're looking at it from the best of rate of the existing.
Stores that we're buying and we look at it from the market presence that they have the personnel the talent the relationships that they have with their customers. So it's a much more.
Analytical approach to two of the acquisition strategy. So square footage from the average perspective, I mean, we're looking at stores between.
10000, the 20000 and.
I think more importantly, we're looking at stores now that are doing at least $5 million of revenue or more.
And Eric I'll take the second half of that so our average square footage is around 15000 as we speak today, but we're really looking when we look at acquisitions. We're looking at them from best of breed operators best of breed talent that own their market and then we look at the <unk>.
Holistic approach of do we need to expand relocate or keep them and position. So we're looking at all of those things when we make that acquisition and Youll see as we go through the years, we will be expanding and place will be relocating right down the street.
As needed to really double that size of the business and 12 to 18 months.
Okay, Great. That's that's very helpful. I appreciate that color.
And then I guess just last one on me here as.
As you guys look at the private label opportunity, obviously, some some impressive acquisitions to date and we're seeing that start to hit the gross margin numbers, which is.
Really great to see here.
Could you just give us a sense of.
How you view your private label portfolio now any.
The additional sort of holds and that portfolio should we expect you guys to.
Continue to be aggressive on the private label.
Side of things or should we think of your M&A pipeline is sort of strictly additional stores at this point. Thanks.
Yes, so I'll take that this is Tony again.
So we're in the early stages of our private label everybody right now we built up our private label strategy and the back half of Q4, we're really developing it right now in Q1, you can see as we've reported six 2% of our total revenue was and private label, but again early stages. We're looking at this from a.
<unk> standpoint.
<unk>.
The complete replacement of two side by side for line extensions, we have opportunity and lighting nutrients additives. We are looking across the entire department portfolio for opportunities that are not brand agnostic and we want it to be complementary to our brands, we want to carry the best <unk>.
And best solutions and have the best service and the industry and that's complemented by our private label strategy.
Great appreciate the color thanks, guys.
Thank you we have the following question from Mike Grondahl with Northland Securities. Mike. Please go ahead.
Hey, Thanks, guys and congratulations.
If you look at your base of commercial customers and the same store sales were really strong.
Any sense of just sort of new commercial customers that you brought on and the quarter kind of how is that going kind of expanding that commercial base.
Yes, I think and Mike and Mike It's twofold, one youre seeing a tremendous increase of foot traffic and our stores. We're also seeing a tremendous increase in commercial customers around the country.
Both the new states and existing states.
Our commercial team continues to grow on its business and was the $19 million of business back in 2019, that's going to closing on a $100 million. This year. So we're picking up new customers on a regular basis.
And again, both on the commercial side on the Kraft side on the home growth side. We're.
We're picking up customers everywhere.
Got it and then kind of a follow up on the private label.
It sounds like you are in the early innings, there is that portfolio of products going to expand meaningfully or.
Or would you say there is just a few spots to add products to it I just want to make sure I understand that.
Yes.
Yes, so Mike I'll answer that and again, when we're when we state where and the early stages, we've rolled out some.
Early franchises like our eye on lights, and some nutrient and additives, but yes. We're in the early stages of our paywall and several other departments that were looking at to complement the brands. So we have upside and.
2021.
The build out our private label brand to complement our other brands.
Okay.
Got it sounds like a lot of margin benefit there too thanks guys.
Yes.
Thank you. Your next question comes from Aaron Grey with Alliance Global and please go ahead.
Hi, good morning, and congrats on the quarter guidance.
First question for me is just on potential new markets.
We expect the clean new Mexico, which recently legalized adult use cannabis and just looking at the license structure. It looks like it's something.
It could be and I expect for generation and so would just love to get your thoughts on new Mexico, and the new adult use market for you guys. Thanks.
Right now.
We certainly are looking at the new Mexico market, we of stores in Colorado, and Oklahoma that sell into new Mexico, but you probably will see us in new Mexico and the next 12 months on the market is just the unfolding right now it's a smaller market and most markets that we're currently in but as we build out the country Iron right now we're in 12 states and Mississippi will be.
Our 13th on that.
We're currently building right now and we of 38 state we of 37 states to go and the country. So new Mexico, certainly buy it be on the list you are seeing some tremendous again.
Moving right now and Virginia, Alabama, So states are coming on on a regular basis youre starting to see that sea change right now with really the voting and individual states are going up into the 70% Mark and we do believe that as these states come on board is certainly going to start pushing the federal government to make some changes.
Ranges and their rules and regulations.
Okay. Great. Thanks, that's helpful and the second question I have is just as <unk> continues to build and scale.
And and we're taking on more efficiency I'm wondering as you kind of grow and enter into new markets.
And of the impact that you guys might be having.
Turns of nearby Hydroponic stores are you guys seeing some sort of kind of like Walmart effect because of your scale, you're able to compete much better the neighboring stores and is that where youre seeing some of the increase and the average stores that you are gaining share from the other competitors nearby will just kind of love to get more comments, Jonathan competitive dynamics for that some of those new markets you want to enter into in the.
Maybe the nearby competition.
And I Wonder one of the things that we're seeing as we enter new markets. Erin there really is very little competition. So when you go look into New York market, right, now and Mississippi and even when we entered the Oklahoma There was very little competition, which youre seeing as competition and mature markets like California and Michigan.
Colorado main states that we are in right now and we're winning and so one of the things the when we grow Jen really looks at its portfolio, we're winning and the most mature states and the country right now and we start walking into new states coming on board, taking Mississippi right now we're on two different panels and Mississippi right now we're on.
First mover and Mississippi, as we Werent, Oklahoma, and we do believe that our Oklahoma business will which is approaching $100 million.
On this year, we're building on our six store right now and Oklahoma, We still we see we see the same kind of cadence.
And Mississippi, Youll see it and new Europe, you may see it in New Jersey.
So we do believe that we're winning and the competitive states right now and.
We will be owning the new states coming on board.
Also air and just to add to that our channel power gift.
The advantage when we enter into the states both size channel power and growth pro professionals definitely set us apart as we enter into the states.
Thanks for that that's really helpful color I'll jump back in the queue.
Thank you.
Your next question comes from Garik Pascarelli with Cowen. Please go ahead.
Hey, guys. Good morning, Thanks, very much for the questions hope everyone's well.
And.
Darrin I'd like to get.
Your thoughts are and update I know you mentioned it and one of the previous answers, but the situation at the ports.
Now you have gas shortages have you seen any improvement really Mike over the over the past couple of months relative to where we were at the end of the year and if not what are you expecting to maybe see some improvements on that front. Thanks.
We haven't seen improvements, which you are seeing is that so many of our larger orders started back in January and last year that products are starting to come in and like anything else, we're ordering and much bigger size, but the containers. The containers are certainly sitting at ports.
We also are seeing tremendous problems coming out of India, right now with Coco and certain other products coming out of India. So we don't see it abating for some time the only positives is grow Jen has never been.
The better inventory right now, we have almost $80 million of inventory spread around the country and we debt we've done a tremendous job getting ahead of.
All of certainly saw on our spring and summer planting seasons, so grow Janus forecasting usually anywhere from four to six months in advance of different seasons, and the market and we certainly understand.
Our bigger skus are better selling skus, so we're very heavy and our.
Higher selling skus and still are.
Out of our products are not coming in from overseas a lot of our neutrally and brands are still still United States manufactured so we're well stocked and one of the other things, we're certainly better stocked and every one of our comp competitors and the country right. Now. So we still are of the go to place and we will continue to keep the ROE Gen snap and.
On the third note with that we have relationships with every manufacturer and vendor and the country on.
And we have the capital to buy out the by size in any products that we think.
And it will be hard to get and the future. So we are certainly stocking of inventory and our words and our warehouses as we speak.
Yes.
Got it.
Thanks, very much for the color.
And last one for me is just on the pricing environment.
Kind of given what has brought it would've been broad increases.
And input cost inflation.
Do you expect to see price increases from Premier third party.
Suppliers and if so do you think youll be able to pass some of some of that of long tier to your customers.
We have seen increases from our suppliers and manufacturers and we have been able to pass those pricing price increases on.
Perfect.
Very much for the color guys and I'll hop back in the queue.
Thank you.
Thank you. Your next question comes from Scott Fortune with Roth Capital Scott. Please go ahead.
Hey, Good morning. This is Nick on for Scott just building off of previous question with the scale and pricing power you are seeing across your portfolio. I was just wondering what youre seeing on the transaction side in terms of multiples and whether or not youre targeting of certain multiple range for your future acquisitions.
The multiples that we've seen 3% to five times EBITDA half time sales.
And have been pretty consistent and what were out purchasing right now we haven't seen.
Inflation on that side, one of the things from <unk> and we can open the store within three to six months anywhere in the country and it will be successful first month open.
So like anything else, we're buying best of breed, we still have a very.
Very full pipeline of acquisitions throughout this year and we also have a pretty full pipeline of greenfield stores around the country.
Okay, Great. That's helpful and then switching over to your footprint side, you've built out of robust distribution and fulfillment network here.
And as your business matures and your footprint kind of grows deeper instead of wider how are you evaluating this footprint and you would.
Consolidation and some areas bring potential cost savings and the future or how you're kind of looking at that.
I'll take this on Nick.
As Darren shared with you earlier, we've got 37 states of growth ahead of us.
As we look forward, we have a regional supply.
Supply chain hub strategy Thats in front of US we're building out what's called the hub fulfillment center and <unk>.
And spoke model.
And with the growth ahead of US, we're nowhere close where and the early innings of this entire buildout. So consolidation is not even on our minds right now it's about how do we build out the U S footprint.
And we have a very significant strategy in front of US debt, we are targeting and working on every day to get built out.
Great. Thanks for the color.
Thank you.
The next question comes from Glenn Mattson with Ladenburg Glenn. Please go ahead.
Hi, Thanks for taking the question and the.
Nice results as usual the.
Curious about gross margin was better than I had anticipated and I'm just wondering I know private label.
Plays the role obviously, but.
And the not too distant past when you were a much smaller company, whether or not you got big orders are not that quarter kind of the enterprise type orders would move the gross margin needle is that still the case or are you. So big now that like.
That doesn't affect it and just kind of how should we think about gross margin over the rest of the year.
We feel the gross margins will stay pretty constant as you saw on the first quarter and because of our size you won't see one individual sale move margins and this day and age.
Yes, if you bridge the gross margin for the quarter Glenn like you said private label is a very big component of that 110 basis point.
Movement, and our gross margin from first quarter of 2020 of it.
The first quarter of 2021, so we continue to push on that the proprietary brands addition, and in Q1 also helped overall, we ended up with six 2% of private label sales versus less and one last year. So that's the primary engine of of our gross margin expansion as well as efficiency.
And that we're seeing and our supply chain because of our scale.
And are you.
Willing to give any long term update and in terms of either.
Gross margin or just overall margin I know you kind of give some long term updates about the.
100 locations and 2023 and setting the groundwork for $1 billion of revenue company and the not too just the future can you just.
And maybe youre not ready to do this today, but is there any possibility you could give us some.
Thoughts on what the margin profile of the business would be when you get to that kind of scale whenever that maybe.
So yes, I think that we will have some more to talk about later in the year.
As we develop our long range plans, we're executing 2021 right now.
And growing this business of 173% this calendar year, we'll be coming out with longer range plans.
Later on this year and as as Darin mentioned growing the store count to 100 to 100 by 2023 is our is our target that we've put out there right now.
And Jeff I missed the cash flow from operations cash use and operations can you repeat that number.
Thank you.
Sure.
So on a net cash from operations, we were positive of $1 million.
We had some investments and inventory like Darren talked about that was the biggest.
Movement that we saw this this quarter as we invested in inventory to prepare for the season.
So we feel really good about the ending balance and inventory and that was the <unk>.
Usage of cash from the organization, but if you look at the.
EBITDA for the quarter of $11 million on on adjusted basis that operating cash allows us to continue to invest and the business going forward.
And we're looking at that as an opportunity for us to continue to grow the business and scale.
Right.
I guess the last thing would just be the change of cash sequentially. It was mostly than Capex and.
Acquisitions or was there something else.
Yes, it's primarily our $39 $3 million of investment in acquisitions, we did have a marketable security at the end of the quarter.
So if you add the marketable security with the cash we're still sitting at a 130 million plus on the balance sheet. So we're.
Really have that debt that dry powder to do the acquisitions that we have planned for 2021.
Okay, great. That's it for me thanks.
Thank you there and no further questions at this time Mr. <unk> you May proceed.
Yes, I just like the some of the first start start by thanking.
Our 600 employees for their tremendous job that they've done and the first quarter of this year during very difficult times in our country with COVID-19 and everything that you're seeing out there. Our employees have worked tirelessly to service our customers and certainly our communities.
With that we're in I want to thank each and every one of our shareholders for having faith and this company and I just want to once again.
Tell everyone. This is the early innings of essentially wide zone of the cannabis industry is in the short term phenomena and.
Watching and trading stocks every day certainly can get tiring.
And certainly believe that we are of a first mover advantage in this industry. We have many decades of growth in front of US we have scaled this business from a $30 million business in 2018 to guidance. This year of over $450 million. So we couldnt be any confidence and what we're doing of grow Gen. The staff debt.
We're building the executive team or grow pros and I couldnt be prouder to be the CEO and the chairman of this company and also the cofounder of Michael Solomon.
With that everyone stays safe and.
We certainly look forward to updating everyone. After.
In August for our second quarter numbers. Thank you.
Ladies and gentlemen, this concludes your conference call for today. Thank you participating and ask that you. Please disconnect your lines.