Q2 2021 Hydrofarm Holdings Group Inc Earnings Call
[music].
Our beat and ready to go.
Good day, ladies and gentlemen, thank you for standing by welcome to the Hydro form holdings second quarter 2021 earnings conference call. At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions. Following the presentation. Please note that this conference is being recorded today August.
12 to 2021, I would now like to turn the call over to Mr. Fitzhugh tailor managing director at ICR to begin.
Thank you Stacy good afternoon.
With me on the call today is bill color Hydro farms, Chairman and Chief Executive Officer, John London, The company's Chief Financial Officer.
By now everyone should have access to our second quarter 2021 earnings release and form 8-K issued today after market close.
Documents are available on the investors section of Hydrophones website at Www Dot Heidrick farm dotcom.
Before we begin our formal remarks. Please note that our discussion today will include forward looking statements.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
For all of you to our recent SEC filings for more detailed discussion discussion of the risks that could impact our future operating results and financial condition.
Lastly, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release.
With that I'd like to turn the call over to Bill Taylor Bill.
Thank you fits you and good afternoon, everyone I'm pleased to report another quarter of strong growth in our business, we enjoyed growth across virtually all of our product lines all of our geographies, including both new and mature markets.
To briefly touch on this we grew our topline, but almost 47% and improved gross profit by over 65% year over year.
More importantly, as our proprietary brands are becoming a larger part of our total sales. We benefited from this favorable sales mix and posted over 127% improvement in adjusted EBITDA and a 430 basis point increase in adjusted EBITDA margin to a very solid 12, 1% in the quarter.
We believe this result is evidence of our unique positioning as a leader in manufacturing and distributing differentiated branded hydroponic equipment supplies in the controlled environment agriculture market.
To maintain our momentum going forward, we will remain focused on our four key growth drivers first drive and increase the penetration of our proprietary brands inside of our company again. These are the brands that we own and represent a key growth opportunity for us due to their higher margin profile.
Second develop strategic relationships to convert more brands in the preferred brand status. These are brands that are primarily sold into the hydroponic channel through hydrophone.
Third drive our commercial presence by working with our Msos and large commercial growers.
And lastly, which is what I want to focus most of my comments on today is our M&A strategy that we believe will continue to create more opportunity to refine our portfolio and improve margin growth and innovation.
Following our IPO in December of 'twenty, 'twenty, we'd began to reconfigure our portfolio and become a brand owner using our established distribution platform to reach customers. In Q2, we took our first steps towards this goal, but this is a multi quarter process to buy integrate and build these great businesses.
It's still very early days in our reconfiguration, but the early results are very encouraging specifically our team has been very busy in the last few months, adding four impressive businesses to our portfolio since the beginning of the second quarter.
In early May we competed yet completed the acquisition of heavy <unk>, a leading manufacturer and supplier of premium plant nutrient nutrients as a trusted brand with a highly respected team and broader awareness with availability in over 300 retail stores here in the U S have you 16, as an excellent business with a strong foundation of highly profitable.
Rytary nutrient offerings in June we completed the acquisition of another fantastic business House and garden with their own strong product lineup plant nutrients. They further strengthen our position in the nutrient category and complement our rapidly expanding portfolio of premium products. In addition, their expansive distribution network reaches 40 stage.
It's in over 10 countries and gives us a great opportunity to extend our global reach and market penetration subs.
Subsequent to the end of the second quarter, we completed our third acquisition in Aurora innovations in Oregon based supplier organic soil grow media and nutrient products Aurora as offerings provide hydro farm with its first organic nutrient and premium soil brands. In addition, we also gained new domestic manufacturing and distribute.
<unk> capabilities on the east and West coast in the U S and a peak malls harvesting operation in Canada.
Lastly, last week, we successfully completed the acquisition of Canadian nutrient distributor and manufacturer Green Star plant products, a company that we have a long and profitable shared history Green stars product line in crude clouds grow Tech Guy, a green Earth safe and Super Green plant nutrients all of which.
We believe we'll be further strengthen our lineup of high performance proprietary branded nutrient products. These businesses not only add proprietary offerings into nutrients and growing media categories, where we haven't historically had a strong contingent of our own brands. They also provide great recurring revenue at our highly profitable right.
And it had a positive impact on our P&L almost immediately.
Not to mention they've added valuable manufacturing and distribution capabilities to our business.
Me quickly expand on this with some second quarter statistics.
Considerable portion of our portfolio has now grown to approximately 69% up from 67% last year.
Our product mix second over 68% of our sales now comes from proprietary and preferred compared to 65% previously.
And lastly, these accomplishments are only enhanced because of the dedicated people behind it they have allowed us to recruit many great new talent into hydro form I'd like to take this opportunity to welcome all the new team members from the companies we've acquired to the Hydrophone family together, we can accomplish many great things to summarize we consider these businesses to be high.
Both accretive attractive margin profile as it will be accretive to our overall business, but more importantly, these transactions further solidify our position as the acquirer of choice in this highly fragmented and fast growing industry. So while we're off to a good start in the M&A activities, we still have a lot of opportunities available to us and we'll continue to put our focus.
Because behind this strategy going forward.
With that let me shift gears and quickly update you on the investment in our infrastructure as I've mentioned in the past our distribution footprint is critical for our ability to better service, our larger long term customer base and stay ahead of growth. When you couple of the recent acquisitions in the past six months with the two distribution centers expect it to be.
In Q3 of this year, we will grown our combined distribution center and manufacturing footprint by approximately 70%.
As we look ahead over the next few months, we'll be moving into two new distribution centers, one in northern California, and one in southern California. In fact, we move into southern California, a bit. This week you may remember, we also expanded our Portland, Oregon facility earlier. This year. These new facilities are all larger and located in better areas logistically.
Lastly, we are finalizing our plans to add an additional centers for distribution in the next six to 12 months. If you recall it was our goal to expand our distribution footprint by about 25%. This year and as you can see we're well on our way to exceeding that goal.
Finally, let me remind you were still in the early innings of a long progression to full legalization is still there over 60% of the U S population that resides in a state that does not have access to legal adult use cannabis I truly believe the legislation is at a tipping point and the investments we are making in our infrastructure today will position us.
To serve the expected surge in adult use cannabis demand before I turn it to John Let me reiterate how excited we are with the long term growth potential to see a industry and the fact that hydrocarbons uniquely expected to capitalize on that growth to that end, we will continue to grow our organic topline execute on our proprietary preferred brand strategies drive.
Our commercial business and capitalize on the many opportunities we have in M&A to build a strong portfolio of proprietary branded offerings with that I'll turn it over to John for a little more update on the financial results and an important update on our 2021 guidance John Thank you Bill and good afternoon, everyone.
Net sales for the second quarter increased 46, 7% to $133.8 million from $91.2 million in the prior year period.
The increase in net sales was dominantly organic volume driven growth, though the two acquisitions completed in the quarter heavy <unk> in house and Garden had a positive impact as did one notable preferred brand.
Once again, we experienced increased demand throughout all of our end markets and faster growth across our proprietary and preferred brands, which continue to outpace our peer distributed brands.
Gross profit during the second quarter also increased by 65, 5% to $29.6 million as compared to the year ago period, while gross profit margin improved by 250 basis points to 22, 1%.
This was driven primarily due to a favorable mix shift towards proprietary and preferred branded products, which typically carry a higher natural profit margin than pure distributed brands.
Selling general and administrative expense increased to $27.3 million in the second quarter of 2021 compared to $12.8 million in the year ago period. The increase in SG&A was primarily due to increased costs associated with the recent acquisition integration activities.
Which accounted for approximately 70% of the total increase while higher costs associated with supporting our public company status and long term growth strategy made up the difference.
Excluding acquisition and integration costs share based comp costs, and depreciation and amortization SG&A was $14.5 million or 10, 8% of net sales in the quarter versus 11.1 or 12, 1% last year. So on this comparative basis, we realized operating leverage in the quarter once again.
Yeah.
Reported net income attributable to common stockholders was $2.3 million or <unk> <unk> per diluted share in the second quarter compared to $1.9 million or <unk> <unk> per diluted share last last year.
Weighted average diluted shares outstanding were approximately $42 million for the second quarter of 2021.
And approximately $29 million for the prior year pre IPO period.
Similar to last quarter, we have calculated pro forma adjusted net income and applied pro forma weighted average diluted shares outstanding.
As if the IPO had occurred at the beginning of January 2021, 2020, rather which is the earliest comparison period.
On this basis pro forma adjusted net income for the quarter was approximately $12.5 million or <unk> 30 per pro forma diluted share compared to a profit of $4 million or 12 cents per pro forma diluted share in the year ago period.
Lastly, adjusted EBITDA more than doubled the $16.2 million or 12, 1% of net sales for the second quarter of 2021 from $7.1 million or seven 8% of net sales last year.
Moving onto our balance sheet and overall liquidity position.
As of June 32021, we had $195.4 million in cash cash equivalents and restricted cash of $50 million of available borrowing capacity under our existing credit agreement and only $1.7 million and an aggregate amount of debt outstanding.
And while a portion of the proceeds were received prior to the quarter end and therefore included in the $195.4 million number mentioned earlier on July 19th subsequent to the end of the quarter. We completed the redemption of the outstanding Investor warrants raising approximately $54.8 million in net proceeds.
As Bill noted earlier, we also completed the acquisition of Aurora and Green Star plant products.
Sequential quarter, which resulted in a combined cash outlay of approximately $218 million.
As a result of these transactions and as noted in today's press release. We are currently evaluating various debt financing options to continue to fuel our M&A strategy and overall continued growth.
We will update you on our debt financing plans as soon as practical.
Lastly, based on the continued strength in our overall business as well as our acquisition activities to date, we are now updating our 2021 outlook.
We're now expecting total company net sales growth of 45% to 50% for the 12 month period, ending December 2021, and.
And adjusted EBITDA of $50.55 million to $62 million for the same period.
Please note that this outlook only captures partially you have partial year contributions of the four acquisitions completed between May and early August on a pro forma combined full year basis had we owned the acquisitions for the full year. The company would expect to generate between $565 million and 590 million.
Net sales in.
And approximately $80 million to $90 million of adjusted EBITDA.
In closing we remain excited about our longer term long term growth prospects and continued margin enhancement.
Our internal initiatives as well as our M&A strategy.
We see these initiatives already making an impact on our business, even as we begin lapping strong comparable from last year's third and fourth quarter.
Lastly, I would also like to extend my welcome to all of the new talents, who have joined us in the past several months as we now look forward to jointly executing our growth opportunities together.
This concludes our prepared remarks, and we're now happy to answer any questions you might have operator, you want to open up the lines.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is just a question queue. You May press star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Your first question comes from Andrew Carter with Stifel.
Hey, Thanks, good afternoon guys.
Interesting.
I appreciate the guidance update today, and maybe I'm not sure if I had the acquisition contribution right in the quarter, but through the second half I'm getting kind of at the midpoint kind of 5% kind of underlying organic growth. So I guess could you kind of talk about kind of that kind of that step down and maybe what you are saying to you. This first I guess, we're six weeks into the quarter anything you can tell.
US help us with there Oh I'll stop there. Thanks.
So as we've been saying as you start lapping the plus 60% growth numbers from Q3, and Q4 of last year. The percent changes are obviously going to get get a little tighter I think your 5% is way conservative.
They're an important part of the challenge for Us is.
When an M&A comes in like a heavy 16 or a house and garden and it's fully incremental to us and we never distributed before it's easier to capture that when an M&A like like Green Star or Aurora comes in where we already distributed the brand that essentially is really organic to our company. So it's not the same.
It's harder to tease that apart right, we might pick up some sales outside of the stuff that we didnt distribute for them before but it's very difficult to pull all that apart I think your your 5% number is very conservative there as far as how the how the quarter is progressing we're pleased with where we sit as of as of Q3.
Thank you.
You know a number of sort of overall factors that are going on in the industry that that have caused things to change trajectory a little bit, but we think it's primarily.
Isolated situation a couple of places and we already starting to see things bounce back to the levels that we had been seeing back earlier in Q2. So overall, we feel good. Thank you we're a little tight on the 5% for sure and again, we've got that difficulty of peeling. Apart. These brands that are already hours.
Fair enough and I guess, the second question and I appreciate the update on the portfolio transformation a big aspect of the story has been the inventory demands 95 days, but through the acquisitions you've bought a lot of higher margin businesses that were you know now you know you don't have to have that margin sitting there in inventory anymore can you kind of give us an update on kind of the.
How about how the working capital demands a change to the business, because obviously theres more capital intensity on the Capex side. Thanks.
On the working capital has been a.
Interesting for the whole industry is everybody has struggled to get reliable supply from all over the world right. Most of the soil and grow media suppliers are behind many of the equipment suppliers in China are behind their lead times have been extending from what used to be six or eight weeks to know water up to several months. So we've taken the strategy of lean into <unk>.
<unk> leveraged our balance sheet towards inventory to be able to service the customers right and we didn't have a whole lot of control on a lot of the M&A is as to what their inventories are level.
Inventory levels were a couple of more higher a couple of them were lower so it's not exactly a normalized time to evaluate inventory days I think with the worldwide supply chain is still being a bit altered from all the challenges over the last 18 months, we're still coming to what I'd call. It would be a normalized level.
Yeah sure I'll, just chime in as well Andrew Youre right I mean with the pickup of four manufacturing businesses. There is going to be a little bit of an incremental spend behind it you see that to some extent in our call out in the press release of a step up in the Capex that we're intending for this year to $810 million.
But with respect to inventory and inventory turns I think we might see a step up a tick or two.
In terms of a couple of days relative to maybe what you've seen historically really did enable sort of that that raw material component of the overall manufacturing process, which we really didn't have in our present in our business before.
Thanks, I'll pass it on.
Thanks Edward.
Your next question, Jon Andersen with William Blair.
Hey, good afternoon, and congratulations on the quarter and the acquisition. Thanks John.
Uh huh.
Question on the acquisitions themselves.
Your you've had picked certain businesses and brands here and it made.
A series of <unk>.
Acquisition since the start of the second quarter.
How should we think kind of in aggregate about the.
Growth rate of these businesses going forward is the right way to think about it. These were brands that you saw as particularly attractive with higher than average growth rates in the marketplace. Thus you know you wanted to own them and make them proprietary and then the second part of this acquisition question is as you take on more.
More proprietary brands our own brands.
Do you need to also maybe invest more in innovation and demand generation activities relative to doing business in a preferred or distributed way. Thank you I know, there's a lot there I appreciate it.
Yes to answer your last question first we are in.
Investing in innovation and marketing at the same time, where we're buying businesses right.
It's a lot quicker payback to drive innovation on your own products than it is to go out and buy companies. All the time. So we're doing both we're dialing up our marketing efforts are frankly to levels that we've never seen before in a historically, we weren't a huge marketing company and still as a percent of sales, it's still going to be a fairly small number but we believe strongly I mean, my whole history John.
So history, many of our leaders histories, they've been around brand building through innovation and marketing. So yes, that's a key part of what we're doing as to how we targeted the businesses that we've acquired frankly, we had a profile of we always wanted to get more into consumable categories. We didn't have brand representation in Gro media or neutral.
So that was a target that we want to find sort of the best available quality products that we thought had a role in the marketplace and play different roles in the marketplaces. In these these brands all kind of fit together like that and so then and then of course the third opportunity has to be that these brands are willing and interest interested to sell at a particular time and so those three.
Things all came together on these first four businesses and we feel very good about the portfolio that we've built.
Been heavily consumable oriented so far it doesn't mean, we wouldn't look at a you know a key.
Capital type business or a durable type business that could be in our future as well, but right now we're pleased to get our consumable side in our consumable brand portfolio built up.
Super helpful. One quick follow up I think at the time of the IPO you had eight distribution centers across North America could you and I can't recall, how many manufacturing facilities, but could you refresh.
Those numbers today with the acquisition, what the manufacturing of D. C footprint look like and why why.
While the investments what kind of <unk>.
On the DC side eight was the number at the IPO. It is still eight we've enlarged one Portland, Oregon, and we're enlarging to more southern Cal and northern Cal and we are looking for another facility or looking to open a facility in the southeast southwest type of area to cover the demand down there too.
In Canada our.
It's still the two in Canada for now.
As far as manufacturing, we did some what I would call light Assembly work in one of our facilities in the U S, but really our manufacturing acquisitions have been the the heavy the house the Aurora and the Green Star. So now it gives us a.
Cadre of for nutrient plants to soil plants couple of warm casting facilities and a N a pete.
Manufacturing facility up in Canada.
Thanks, so much.
Next question, Peter Grom with UBS.
Hey, good afternoon, everyone Hope you guys are all doing well so.
I just wanted to follow up.
And a follow up to Andrew's question, because I think it's pretty important.
Could you maybe help us tease out what M&A contributing to the top line in both the quarter and then your in your guidance I mean at least Directionally, because I think last quarter, the math implied 26% to 36% organic revenue growth range. So I think investors are trying to understand how much of a slowdown versus last quarter is actually embedded in this guidance.
If at all.
Now, let me chime in on that yeah with respect to Q2 the quarter. We just completed we had top line growth as we mentioned just using round numbers around 47% I think I'd tell you about 900 basis points. So about 9% of that 47 was M&A grows so contribution from housing garden heavy <unk> in the quarter.
So as we think about our guidance or.
Maybe as you should think about our guidance of 45 to 50 year over year, which is an update from our prior quarter guidance.
Really.
Inside of that is roughly 25% to 35% year over year growth again. This is annual guidance year over year growth for what I would maybe call our legacy business and approximately 15% to 20% of M&A growth and I think if you kind of walk through the.
The press releases for each of the acquisitions that we've completed up to this point and I think and maybe all of those press releases. We may have had a 2021 full year estimate obviously, we don't own these businesses for the full year, but I think if you work that math it should roughly tell you in <unk>.
Mark you through exactly what I just explained.
By the way I think I would just comment too that that 25% to 35% year over year growth is pretty comparable to kind of what we've called last quarter as well.
Okay. That's incredibly helpful. And then I had a bit of a longer term question on the margin opportunity I think most of that are listening on this call as the press release seems to have kind of come out this quarter.
I'd say I've been surprised at how high the implied EBITDA margins, where in some of the assets you've acquired and then.
The release Tonight, and pro forma EBITDA margin in the mid teens is far greater than I think most anticipated.
The way, we're thinking about 2022, so given you still have room for future acquisitions and likely operational efficiencies I guess, how should investors really think about the long term margin opportunity if youre in this business and how quickly can you get there given what you've delivered so far.
Yes. Thank you we've had last year was a fix this year's pro forma we just gave you is 15 point too.
And we think we are well on our way to having a solid mid teens kind of business here for the foreseeable future with upset I mean, we now own for nutrient plants. We just hired a leader of manufacturing to help us think about productivity and optimization we are.
Scale out of our distribution centers we've been.
Growing in the growing challenges of becoming a new public company. We spent a lot of money to do all of that so we think there is.
We haven't even gotten to the productivity side of business. We're just trying to capture all the growth that's out there and that's what's exciting for US is that we're showing the kind of mid teens type of profitability with with incredible upside to go. So it's become a I don't think I won't say, it's a surprise to us I think it happened quicker than we.
Might've thought nine months ago or eight months ago. When we did the IPO, but we clearly saw and felt like we could get to the mid teens.
We just didn't want to all you guys to get ahead of us and try and run us out there too fast but.
So we are pleased with where it looks right now and think that we can keep going from here both on the topline and the Bottomline.
Great well, congrats again and best of luck. Thank you. Thanks.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Question comes from Kevin <unk> with Deutsche Bank.
Hi, good afternoon guys.
Hey, Kevin.
Maybe just another deal question sitting here after the Formula is completed in a matter of months is there a point at which you need to slow down and ensure the deals you've done are performing well and are effectively a part of the hydro form entity or do you have the bandwidth to kind of continue to go after deals.
Yes, very fair question, we've talked a lot about this right, it's particularly a a bandwidth question around the financial integration. Many times, we're buying family businesses that arent up to the sophistication that we are we've been able to put in external resources internal resources, we've been hiring and adding things there.
We arent going to keep the pace of one a month I will promise you that that's a bit that's a bit aggressive but also you can't time M&A when it when it when it becomes available and we want to become aggressive but not not not overly aggressive to do things. So you can expect us to stay on this track to doing more and more and more but yeah.
I think that the one a month pace is a little a little a little little quick and we've been able to absorb it so far in getting everything file on time and feeling comfortable that we've got the right information and numbers.
But it will slow some but we're still going to become an acquirer of choice and a personal rolls up his business and rolls up this industry hopefully quite successfully.
Understood. That's helpful. Thank you maybe just one more sure realizing it's a bit early to be talking about 'twenty, two but just thinking about your guidance some of the comp issues in the back half of this year I'm curious if you have any first plus thoughts about you know the industry or our company growth prospects from 'twenty two given some of those dynamics.
Those nations that are taking time to play out et cetera.
It's been a it's been interesting to watch because that number I quoted the 60% of people that can buy today or a year ago that number was over 70. So a bunch of legislation has happened, but not much implementation has happened. So it's tricky to get ahead of this because the states have been very unpredictable and implementing right and we had a clear path.
On what you know in New York, New Jersey, Virginia, Connecticut, we're going to do it would be easier to know, but right now, they're all sort of playing politics with each other and not really sure where its going and so we're cagey. There. So we don't have a number yet this is only halfway through our year as you know and so were we.
We're really focused on getting the M&A is integrated continue to drive innovation and organic growth and will be out later this fall with the or in the fall with sort of outlook for 'twenty, two and maybe the only thing I would add to reinforce is just I mean for sure the long term math in this category.
And that we remain very excited about I mean, we're we're still we believe very much in the early innings.
You'll get a full year contribution from acquisitions next year, hopefully, we'll find a way to get another deal or two done.
Over the next six to 12 months and so I think we're going to be quite excited about 'twenty, two but no numbers just yet for you.
Got it no that's totally fair, thanks, very much I'll pass along thanks.
Next question Bill Chapell with Scherlis Securities.
Thanks, Good afternoon.
Hey, Bill.
Bill you kind of alluded there is some some kind of hiccups, but some issues in certain areas in the quarter kind of implying that maybe revenue could have been even better and things have kind of a ramp.
Ramp back up since we started <unk> could give us a little more color on that.
Yeah, No I would I would say that Q2 was pretty solid yeah. We came into July a little slower than we hope, but there is all kinds of external factors that are going on it's.
He waves in Oregon, and big fires in California that causes little little little blips, but we think that those are largely going to be a few week thing and not really matter too much but.
We think overall that we're still in a really good spot in the growth will be there.
Got it and then one thing kind of struck as I think you said in the release that pricing only added about three 4% to top line growth would you expect are you taking pricing with higher costs for your own brands, where you would see that would be a much bigger number in the back half.
Yes, I mean look bill we continue to reassess pricing on a quarterly basis, and obviously right now just the overall supply environment not just for us, but the whole industry and frankly other industries is very dynamic.
So it's a little hard for us to take too much of a long game view on it right now I think we're trying to manage it quarter to quarter, we basically taken pricing in each of the last two or three quarters now with the intent of really lifting margins from a pricing mechanism, but really maintaining margins and finding productivity and our portfolio shift as a way to drive March.
<unk>. So I think we will continue to drive and that sort of quarterly cadence from here.
Got it and then last one.
On the M&A front, I mean I understand the.
All the nutrient businesses are different but is there a point, where you've filled out the nutrient side of the portfolio, where you don't need more and do it at some point do you start to get negative reactions from the companies, you're not acquiring and that of your.
Rooting for.
No. It's certainly a conversation we have with them, but all of them know kind of how we fit I think are our share and nutrients. If you add all of our distribution our proprietary brands and even our distributor brands, we're probably still only a 15 share. So it's a very large and fragmented.
Fragmented category. So we think we've got some room to go there, but also we want to make sure we have good balance in the portfolio. So yeah.
If we don't do a nutrient one next that would might make sense, but after that we would certainly look at some if they're the right ones and fit fit a niche or a role that we could expand.
Great. Thanks, so much for the color. Thanks Bill.
I will now turn the floor over to Bill Taylor for closing.
Terrific. Thank you Stacy and thank you all for being on the call today. We appreciate your interest in Hydro farm and look forward to speaking with you down the road. Thanks a lot.
This concludes the teleconference. You may disconnect your lines at this time and thank you for your participation.
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Okay.