Q3 2024 GrowGeneration Corp Earnings Call
At this time participants are in a listen only mode.
Following prepared remarks, we will open the call to questions from analysts with instructions to be given at that time. This conference call is being recorded and a replay of today's call will be available on the Investor Relations section of grow generations website.
Speaker Change: I will now hand, the call over to Phil Carlson with K C. S H for introductions and the reading of the Safe Harbor statement. Please go ahead.
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Thank you and welcome everyone to grow generally she's third quarter 2024 earnings results Conference call.
Phil Carlson: With us today are Darrin Lampert, co founder and Chief Executive Officer, and Greg Sanders, Chief Financial Officer of grow generation.
Phil Carlson: The company's third quarter earnings press release was issued after the market closed today.
Phil Carlson: A copy of this press release is available on the Investor Relations section of the cogeneration website at IR Doc Pro generation Dot com.
Phil Carlson: I would like to remind everyone that certain comments made on this call include forward looking statements, which are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Phil Carlson: These forward looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties.
That could cause actual results to differ materially from those described in these forward looking statements.
Phil Carlson: Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any of the forward looking statements made today.
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Phil Carlson: During the call, we'll use some non-GAAP financial measures as we describe business performance.
SEC filing as well as the earnings press release, which provided reconciliations of non-GAAP financial measures.
Phil Carlson: Most directly comparable GAAP measures are all available on our website.
Phil Carlson: Following prepared remarks measurement will be happy to take your questions. We ask that you. Please limit yourself to one question and one follow up if.
Phil Carlson: Do you have additional questions. Please reenter the queue and we will take them as time allows.
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Speaker Change: Now I will hand, the call over to grow generations co founder and CEO Darren Lampert Darren. Please go ahead.
Darren Lampert: Thanks, Phil and good afternoon, everyone.
Lovely: Hello everyone and welcome to Grow Generation's 3rd Quarter 2024 Earnings Conference Call. My name is Lovely and I will be your operator for today's call. At this time, participants are in a listen-only mode.
Darren Lampert: We appreciate you joining us today as we report our third quarter performance.
Darren Lampert: Pleased to share that our results were consistent with our internal expectations.
Darren Lampert: Reflecting the solid progress we've made under our restructuring plan.
Speaker Change: Unknown Speaker Following prepared remarks, you will open the call to questions from analysts with instructions to begin at that time. This conference call is being recorded at this time and the replay of today's call will be available on the Investor Relations section of Grow Generations website. I will now hand the call over to Phil Carlson with DCSA for introduction and the replay of today's call will be available on the Investor Relations section of Grow Generations website. I will now hand the call over to Phil Carlson with DCSA for introduction and the beginning of today's conference statement. Please go ahead.
Darren Lampert: In particular, we met our targets with store closures and exceeded our targets for proprietary brand and same store sales performance.
Darren Lampert: Of which I will provide details on this shortly.
Darren Lampert: Last quarter, we remain focus on driving operational efficiency, enhancing our product offerings and positioning grow generation for sustainable growth as we look towards 2025.
Our entire team's commitment has been instrumental and want to extend my thanks to them for their hard work and dedication.
Darren Lampert: We believe that the foundational improvements, we're making today will not only strengthen our current performance, but will also serve as a springboard for our growth initiatives with.
Speaker Change: Thank you and welcome everyone to the Growth Generation's Issued Quarter 2024 Earnings Results. A copy of this press release is available on the investment insurance section of the Growth Generation website at ir.growthgeneration.com.
Darren Lampert: With an emphasis on high margin proprietary brands digital expansion and a leaner more efficient retail footprint.
Speaker Change: I would like to remind everyone that certain comments made on this call are foreclosed statements, which are subject to several risks and uncertainties.
Our third quarter results included net revenue of $50 million slightly down from $53 5 million in the second quarter of 2024, as we had anticipated due to store closures as part of our restructuring plan.
Darren Lampert: We're balancing our focus on profitability as we execute on our key growth initiatives.
Darren Lampert: These actions are positioning <unk> for profitable sustainable revenue growth.
Darren Lampert: This enabled us to increase sale and high growth areas with OCA, Mac, Marshall and <unk> customers as we enhanced margins and optimize efficiencies across our organization.
Darren Lampert: We are pleased with our progress and believe these actions will improve profitability and reduce expenses by a minimum of $12 million on an annualized basis.
I'll briefly recap the three major components of our restructuring plan that we announced during the third quarter, which are one offs.
Darren Lampert: A focus on proprietary brands with.
Darren Lampert: With goals of adding approximately 50, new products drove proprietary brand lineup over the next 12 months.
Darren Lampert: For these brands to account for 35% of total sales by the end of 2025.
Darren Lampert: Further we continue to focus on preferred partners, who bring best of breed products to our customers.
Thank you for joining us today.
Then we record the third quarter performance targets.
Darren Lampert: The digital transformation of sale throughout our entire organization with a <unk> customer focus.
Darren Lampert: This includes launching a <unk> e-commerce portal, which we expect to launch in the fourth quarter.
Speaker Change: HHS and dansbelie morines for providing their grant and Saint Georgesville's Population and Growth Generation for Sustainable Growth as we look towards 2045. We remain focused.
Darren Lampert: Great and continuing to streamline our operations and right sizing <unk> retail footprint to align with current market dynamics, we expect to retain the majority of our commercial customers to adjacent locations, while commercial sales force and the <unk> portal.
Darren Lampert: We have been making substantial progress across all these areas.
Speaker Change: and I want to thank the friend board for their hard work, initiative and dedication with an emphasis on the arts and foundational improvements, digital expansion, and the leadership work, our current performance.
Darren Lampert: As previously stated the plan included COVID-19 stores in order to prioritize our best performing locations serving higher customer volumes.
Speaker Change: will also serve as a framework for a growth initiative with an emphasis on high margins and voluntary grants, digital expansion, and a leaner and more efficient retail system. Our third quarter results include part of a restructuring plan. We are balancing our focus on profitability as we execute the second quarter of 2024.
Darren Lampert: Last spoke seven store closures had already occurred since that time. The 12 additional stores. We noted have also been closed.
Darren Lampert: As of today, the company retained 31 operational stores digging.
Darren Lampert: Digging a little deeper into our third quarter results, we want to highlight that our same store sales grew by 12, 5%.
Speaker Change: as we act anticipate a position in growth through shore closure as profitable borrowing trade on revenue outlawat.
Darren Lampert: It is of Paramount importance to note. This marks the first quarter of positive same store sales in three years.
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Darren Lampert: We think this growth shows the high performance of our core store locations and reinforces the rationale behind our restructuring plan.
Darren Lampert: Our third quarter results also display the strength of our proprietary brands as a percentage of cultivation and gardening net sales proprietary brand sales grew to 23, 8%.
Darren Lampert: From 19, 4% last year.
Darren Lampert: This growth was mainly driven by several new product launches during the quarter.
Darren Lampert: Our strong performing proprietary brands and a consistent pipeline of innovative new products. We are on track to reach our target of proprietary brands comprising 35% of total SaaS by the end of 2025.
Speaker Change: With gold remaining in the pre-made new products for a re-priced upgrade to the brand lineup that we announced in the third quarter.
Darren Lampert: This growing portfolio of proprietary offerings is central to our profitability strategy, enabling us to provide differentiated high value products that meet customer needs and contribute to stronger margins for the <unk> generation.
Speaker Change: Unknown Speaker, the 35% of total sales. The digital transformation of sales throughout our entire organization. Further, we continue to support customer partners.
This includes launching a B2B e-commerce portal.
As part of our strategic transformation, we are fully embracing a digital first approach across our sales channels with a strong focus on our <unk> customers.
which we expect to launch in the fourth quarter.
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Darren Lampert: This quarter, we made substantial progress on launching our new <unk> E Commerce portal, which is set to go live in the fourth quarter.
Darren Lampert: This platform will serve as a central hub for our commercial clients.
Darren Lampert: Enabling them to seamlessly place orders online.
Speaker Change: We've been making substantial progress across all these areas, as previously stated, the plan included closing 19 stores in order to prioritize our best performing locations during the entire customer volume across all these areas. When we last spoke, as previously stated, the plan included closing 19 stores in order to prioritize our best performing locations.
Darren Lampert: You real time inventory availability and access tailored product recommendations and pricing all designed to simplify and streamline their purchasing experience.
As we finished the year and move into 2025, we will further sharpen our focus on profitable growth and maintaining a strong balance sheet.
Speaker Change: As of today, the company retains 31 operational stores. Digging a little deeper into our third quarter results,
Darren Lampert: Our cash position remains very solid with $55 2 million and no debt as of September 32024.
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Darren Lampert: Our no debt position and strong cash reserve reflects our financial resilience.
Darren Lampert: We also repurchased an additional one 8 million of stock during the third quarter as we continue to believe our equity has compelling value.
Speaker Change: We think this growth shows the high performance of our four store locations and reinforces the rationale for the first quarter of positive same-store sales in three years. Our third quarter results also display that this growth shows the high performance of our four store locations.
Darren Lampert: Moving onto guidance, we are reiterating our full year 2020 for estimates of net revenue between $190 million to $195 million. We continue to review our outlook for adjusted EBITDA in light of our ongoing restructuring actions and the resulting cost savings we anticipate we will have.
Greater visibility when we close our full year results and expect to provide full year 2025, net revenue and adjusted EBITDA guidance on our year end earnings call.
Darren Lampert: I would now like to provide a brief update on <unk>, our storage solutions business.
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Darren Lampert: As we've previously discussed we believe there is a significant opportunity to further monetize this business.
Darren Lampert: Blake Street capital is currently assessing strategic opportunities related to MMR and we're in the process of receiving and reviewing bid.
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Darren Lampert: The process is ongoing and we will provide any further updates when appropriate.
Darren Lampert: To summarize our third quarter results were consistent with our expectations and show the progress of restructuring measures.
Darren Lampert: <unk> is strategically positioned in the evolving cannabis industry.
Speaker Change: This quarter, strategic transformation, we are fully embracing a new B2B commerce portal approach which is set to go live in the fourth quarter. This platform will serve as a central hub
Darren Lampert: Obviously with the upcoming rescheduling discussion.
Darren Lampert: New leadership pro cannabis span.
Capitalized on industry growth opportunities.
Speaker Change: I will now hand, the call over to our CFO Gregg standards correct.
Speaker Change: for this quarter. We made substantial progress on launching our new traders online commerce portal view real-time inventory available in the fourth quarter and access tailored product recommendations and price will help all the clients to simplify and streamline their purchasing experience.
Gregg Standards: Thank you Darren and good afternoon, everyone.
Gregg Standards: Pleased to report that our third quarter results were in line with guidance as we continued to execute the plan.
I will cover in depth same store sales growth.
Speaker Change: At this time of the year moving to 2025 we will further sharpen our focus on profitable growth, and maintain a strong balance sheet. As we finish the year moving to 2025 and no debt, we will further sharpen our focus on profitable growth, maintain a strong balance sheet. Our cash position remains very solid.
Gregg Standards: <unk> expenses and the improvement in proprietary brand sales demonstrates the alignment of our results through our strategic priorities.
Gregg Standards: Starting with third quarter sales net revenue was $50 million compared to $55 7 million in the year ago period.
Gregg Standards: Decline of 10, 2%, primarily attributed to 25 store closures and the trailing 12 months sequentially.
Gregg Standards: Sequentially revenue declined six 6% from $53 5 billion last quarter the.
Speaker Change: We also re-purchased an additional $1.8 million throughout the 2024. As we continue to believe in strong sales our equity has compelling value—plus our financial resilience. Moving on to Guidance, We also re-referced an additional $1.8 million of net revenue between $190M and $195 million. As we continue to believe, our equity has compelling value. We continue to re-view our outlook.
Gregg Standards: The company closed and consolidated an additional 12 retail stores in the third quarter, which had an impact on overall sales.
Gregg Standards: We cannot be more satisfied to report that our third quarter same store sales metric increased by 12, 5% year over year for <unk>. This marks the first quarter of positive same store sales in three years.
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Gregg Standards: We saw continued improvements in our business within Michigan, Oregon, and California markets and observed challenges in Oklahoma in May.
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Gregg Standards: Relative to the strength of the third quarter same store sales turned positive for the full fiscal year to date through September 30.
Cultivation and gardening net sales were $41 4 million for the third quarter of 2024 compared to $48 million for the comparable year ago period.
Speaker Change: I would now like to provide a brief update on MMI. Our story is related to MMI. We believe there is a significant opportunity. The process is ongoing. We will provide any further updates when appropriate. To summarize, our third quarter results were consistent. We are in the process of receiving and reviewing this. We show the progress of restructuring. The process is ongoing.
Gregg Standards: <unk> brand sales increased to 23, 8% of cultivation and gardening sales for the third quarter of 2024 compared to 19, 4% for the third quarter of 2023 or four 4% improvement.
Gregg Standards: This was driven by continued market adoption of our proprietary brands, including charcoal drip hydro and the harvest company.
Speaker Change: will provide a lead for the rough days in the evolving cannabis industry.
Gregg Standards: We remain laser focused on delivering 35% of sales in 2025 to be driven from our proprietary brands.
Gregg Standards: For the third quarter, the percentage of consumable product net sales in the cultivation and gardening segment generally remained flat at 73% to the prior year, which we view as a positive indicator of stability.
Speaker Change: We now hand the call over to our CFO, Greg Sanders, for our discussion.
and New Leadership. Good afternoon, everyone.
Greg Sanders: We are pleased to report that our industry growth opportunities are in line with guidance that we continue to execute to plan. As I will cover in depth.
Net sales of commercial fixtures within our storage solutions segment increased by 12, 9% to $8 6 million for the third quarter of 2024 compared to $7 6 million from last year's third quarter. This increase was largely due to timing of revenue recognition on various large projects.
Speaker Change: Thank you Darren, and good afternoon everyone. We are pleased to report that our third quarter results were in line with the guidelines of our Results for Strategic Priorities.
Speaker Change: As I will cover in depth, name store sales net revenue is $50 million. Production and expenses compared to $55.7 million. Proprietary brand sales demonstrate the decline of 10.2% which are primarily attributed to 25 store closures. Starting with third quarter sales, net revenue is $50 million.
Gregg Standards: Gross profit margin was 21, 6% for the third quarter of 2024 compared to 29, 1% for the third quarter of 2023 with.
Revenue declined 5.7%.
Within margin, we incurred a 381 basis point impact from inventory cost closed store liquidation sales and freight expenses related to the closures of 12 retail stores in the period in.
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Gregg Standards: In addition, we incurred a 227 basis point impact from heavily discounted sales of discontinued inventory in Q3, which also contributed to our ability to reduce inventory by $12 million in the period.
Gregg Standards: Within our restructuring initiatives, we are revising our product mix to align the business to execute to 35% proprietary brand sales for next year.
Gregg Standards: We expect that this initiative, which will carry into the fourth quarter will have an impact on fourth quarter margin as well, but will allow the business to report a sustainably higher gross profit percent in 2025.
Gregg Standards: Another area worth noting is that we continue to realize steady improvements in expenses as a result of our strategic rationalization efforts.
Speaker Change: Proprietary Brand Sales, Increased to 23 Gardening Net Sales of Cultivation and Gardening Sales for the 3rd Quarter of 2024.
Gregg Standards: <unk> and other operating expenses in the third quarter declined 13, 9% to $10 million compared to $11 7 million in the third quarter of 2023.
Speaker Change: compared 48 million point four percentable year ago the third quarter of 2023 proprietary brand sale point 4% 23.8% this was driven by continued market adoption for the third of our proprietary brands
Gregg Standards: Meanwhile, selling general and administrative expenses for the quarter were $7 4 million compared to $7 $6 million in the third quarter of 2023, or two 3% improvement while SG&A was slightly up from the second quarter of 2024 of $7 1 million. This was largely due to expenses related to <unk>.
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<unk> and other restructuring costs to further optimize our operating model.
Gregg Standards: We expect to communicate additional cost improvements in Q4, as we position the business for 2025 and beyond.
Gregg Standards: Depreciation and amortization was $5 million for the third quarter of 2024 compared to $3 6 million in the second quarter of 2024.
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Gregg Standards: This increase is due to acceleration of certain depreciable assets from our restructuring initiatives through year end for which we expect to retire set assets at December 31.
Gregg Standards: In addition, we recorded a $220000 impairment, which was fully related to leases of closed stores in the third quarter.
Gregg Standards: Net loss was 11 4 million for the third quarter of 2024 or negative <unk> 19 per share compared to a net loss of seven 3 million or negative <unk> 12 per share in the third quarter of 2023.
Gregg Standards: Adjusted EBITDA as defined in our press release was negative $2 4 million compared to negative <unk> 9 million in the same periods last year.
Gregg Standards: Turning to the balance sheet as of September 32024, the company had $55 2 million of cash cash equivalents and marketable securities and no debt.
Speaker Change: We incurred a $250,000 base point impact. We are revising our product mix to align the business to execute to 35%, which also contributed to our ability to reduce inventory by $12 million. We expect that this initiative
Gregg Standards: During the quarter, we utilized $1 8 million to repurchase company shares.
Speaker Change: which within our restructuring initiatives we'll have it revising our product margin as well align the business will allow the business 35% sustainably higher as profit over the next year.
We continue to maintain a strong cash position and do not foresee any near term financing needs.
Speaker Change: As Darin mentioned, we are reiterating our full year 2024 guidance for net revenue to be in the range of $190 million to $195 million.
We expect that this initiative
Speaker Change: Which was worth noting is that Store and other operating expenses in the third quarter
Speaker Change: We expect to provide full year 2025 guidance for net revenue and adjusted EBITDA on our 2024 year end conference call.
Speaker Change: Another area worth noting is that we continue to realize steady improvement compared to $11.7 million as a result of our strategic rationalization effort. Meanwhile, selling general and other administrative expenses in the third quarter were $7.4 million compared to $7.6 million compared to $11.7 million in the third quarter of 2020.
Speaker Change: In closing the financial position of grow generation remains strong we've.
Speaker Change: We made significant progress towards restructuring the business for long term profitability in the third quarter.
Speaker Change: Our primary focus is long term margin expansion cost reduction and generating opportunities for positive topline growth.
Speaker Change: We are dedicated to growing the business on a more sustainable and leaner footing, enabling us to deliver profitable growth for our shareholders.
I will now turn the call back over to Derek for closing remarks.
Speaker Change: Thank you, Greg and thank you to everyone for joining us today.
Derek: As we wrap up our third quarter call I want to emphasize our excitement and confidence and grow generations path forward.
Derek: The progress we've made through our restructuring efforts.
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Derek: Put us on a stronger footing to drive revenue growth optimize margins and build a leaner more profitable company.
Speaker Change: In addition, this included a $220,000 depreciable asset related to our Reduction Initiative of Closed Stores.
Derek: Our focus on expanding high margin proprietary brands advancing our digital transformation and streamlining our retail footprint.
Derek: We're already showing results and we're committed to maintaining this momentum into 2025.
Derek: Our entire team remains dedicated to executing on this strategic plan and I am deeply grateful for their hard work and adaptability as we position grow generation for long term success.
Derek: I'd also like to thank our investors for their continued support and confidence in our vision, we're excited to deliver meaningful value to our shareholders by building a more resilient and sustainable business.
Derek: We look forward to keeping you updated on our progress as we move into the new year that concludes our prepared remarks operator. Please open the line for questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone phone you will hear it pumps that Johan.
Speaker Change: As Darren mentioned, we utilized $1.8 million in our full year 2024 guide shares for net revenue to be in the range of $190 and do not foresee any side-term financing needs.
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Speaker Change: Should you wish to decline from the polling process. Please press the star followed by the numbers.
Speaker Change: If you're using a speaker phone please ms handset before pressing any key.
One moment. Please for your first question.
Speaker Change: Your first question comes from the line of Brian Nagel from Oppenheimer. Your line is now open. Please go ahead.
Speaker Change: Okay.
Speaker Change: Couple of questions if I could.
Speaker Change: First off I guess, just numbers and you talked about.
Speaker Change: The ongoing rationalization of the store base could you remind us.
Where you want to get too.
Speaker Change: And when that will be done.
Speaker Change: And then my second question I guess bigger picture.
Speaker Change: Alright.
Speaker Change: With respect to the continued build out rollout right Jared brands, which just seems like it's happening quite quickly.
Speaker Change: Yeah.
Speaker Change: How could you maybe talk about the portfolio as you're as you're adding these new brands. How is the sales performance of the new brands added versus maybe some of the legacy brands.
Speaker Change: Okay.
Or.
Are you still are you looking.
Speaker Change: We create new products that appeal to different customers. Thank you.
Speaker Change: Yes, I can start Brian we have 31 stores right now so we're down from about 65 stores and COVID-19 stores. This year and when you look year over year were down 25 stores I think we're at a pretty comfortable spot right. Now has 31 on not to say that we may not close a couple more stores next year.
Speaker Change: <unk> has has changed tremendously as we evolved in the industry growth <unk> has now let's go to name Raytheon for most cultivators.
Speaker Change: So the amount of stores is certainly not necessarily around the country as we build out distribution.
Speaker Change: And we build out our <unk> network. So we're comfortable right now we're able to we're able to service our customers around the country right now from our locations certainly are bigger locations, but I do believe you will see a couple more store closings next year.
Speaker Change: That will probably be the whole nine yards.
Speaker Change: With regards to private label.
Speaker Change: <unk> has been has spent the last three years.
Speaker Change: Through R&D and.
Speaker Change: And testing products within cultivation around the country.
Speaker Change: Starting to see right now is everything coming together.
Speaker Change: It takes six months to a year with certain of these products is going through testing.
Speaker Change: Facilities to get some of our customers either Switzerland or adopt.
Speaker Change: <unk>.
Speaker Change: Is different.
Speaker Change: Current products that we're bringing to market and different sides of the industry, whether it would be on the nutrient side of it which is feeding the plant.
On the soil side, a bit on the lighting side of it and harvest co which is new.
Speaker Change: This is a new brand for us on the.
Speaker Change: Early on the <unk> side of it and really on the ancillary side of it.
Speaker Change: Just giving our customers more optionality, so what youre seeing right now is both sort of our customers adopting some of our products and also we're also selling into distribution. So I think youre seeing sales increasing from both ends but.
Speaker Change: But when you start looking at the margin picture for <unk> yet.
Speaker Change: Youre looking at products that are the <unk>, 40% margin business really really have posted some low twenties on a lot of the other products. We're selling so we do believe going into 2025, and you start seeing a balancing of our margins.
Speaker Change: And in the high <unk> to low Thirty's.
Speaker Change: Especially when we're looking at 35% of our what we believe sales next year will be private label products, but with that also we continue to.
Speaker Change: To work with the best of breed distributors manufacturers out there.
Speaker Change: And working very closely with our partners are selling their brands to our customers. So we've always said that growth and given the choice.
Speaker Change: Our products are not always the choice for some of our customers.
Speaker Change: We sell to our customers what they're looking for so we keep a very open.
What we sell.
Speaker Change: Thanks, Darren I appreciate all the color.
Thanks, Brian Good evening.
Speaker Change: Your next question comes from the line of Avon Green from Alliance Global Partners. Your line is now open. Please go ahead.
Speaker Change: Hi, Good evening and thank you for the question. So first question for me I just wanted to hear more in terms of all your efforts to build out the commercial business increasing your sales with some of the larger players the msos. It sounds like Theres still a lot of white space opportunity. So any color you could give on that initiative would be helpful. There. Thank you.
Speaker Change: Yes, I think theres, a tremendous amount of opportunity and I think.
Speaker Change: As this industry grows up and evolve.
It gets more commercialized in a lot of ways <unk> becomes the go to whether it's accounting, whether it's credit whether its product whether its distribution.
Speaker Change: Built we've built a network around the country right now.
Speaker Change: We sell best of breed products, albeit either grow gen products or or vendor products, but on the other side of it.
We have a very vibrant software system to grow Gen accounting systems, we give credit to all our customers.
Speaker Change: So it's just again, it's making it easier for our customers to shop and I think that's what it's about in this day and age getting products to our customers.
Speaker Change: <unk>.
Speaker Change: In a timely fashion best pricing with credit and just making their jobs easier for accounting department to consolidate their bills from from facility to facility.
Speaker Change: We work with our customers like anything else, we have a very big balance sheet, we have $55 million of cash on our balance sheet right now we have the largest inventory positions in the in the industry.
Speaker Change: The plants never sleep.
Speaker Change: Customers don't sleep and like anything else, where there 24 seven to fill orders in and do what we can offer our customers on the other side of it we have a extreme.
Speaker Change: The extremely talented commercial team at growth yet.
Speaker Change: Our commercial teams at the facilities on a daily basis.
Speaker Change: Answering questions about new products coming to market, helping out if there's issues within the grow facilities. So it's not only that we are selling products to our customers. While also helping them grow we're helping them with yield we're helping them with quality.
Speaker Change: Through innovative products or again.
Speaker Change: Our our partners products, but again, we have a team of <unk> I believe as part on in the industry right now.
Derek: Okay I appreciate that color there Derek.
Speaker Change: Second question for me I know you touched briefly on private label.
<unk> performed well for your 24% of sales. So can you just breakdown in terms of as we think about where it is now and getting to that 35%.
Speaker Change: New products and expand distribution could you help us maybe.
Speaker Change: Quantify the drivers how much of that should we think about being driven by the new products and innovation that you guys have going versus just.
Speaker Change: On the legacy Skus, continuing to drive growth, there and higher mix of sales. Thank you.
Speaker Change: I think it's a combination of both there.
Speaker Change: Again, we don't really look at it legacy Skus most of our Skus are still growing so as now there's not much legacy within it most of them have come to market in the last few years that are really driving sales except for charcoal with charcoal is coming out with innovative products, whether it's a 70 30 cocoa prolate mixed right now.
Speaker Change: And you'll also see cocoa coins and as we told you as we've been talking about our drip powders come to market at the beginning of the year that are starting to grow very quickly.
Speaker Change: So harsco, so I think youre seeing growth in our <unk>.
Speaker Change: In our product has been out for a few years, but youre also seeing new products coming to market. So I think youll see a mix.
Speaker Change: Believes our products that we've launched in a couple of user stagnating I think youre also growing.
Speaker Change: I think youll see.
Speaker Change: A nice number within the fourth quarter on growth of our private label Division.
Speaker Change: Tracking much higher than it was last quarter. So we believe that 35% is attainable next year.
Speaker Change: From there we still do believe that you may see it in the <unk> 40 is a couple of years later.
Speaker Change: So again, we couldnt be any more excited with where we are on the private label product.
Speaker Change: It certainly helps with sales of our commercial division is out selling it.
Speaker Change: We have individuals that go to facilities as I said earlier to Bryan facility.
Speaker Change: Facility managers and facilitators. So we're out there right now and I think you know more than any how hard we're working.
Speaker Change: On the business then we spent the last three years restructuring grow Jay.
Speaker Change: I'll be at closing.
Speaker Change: Close to 40 store.
Speaker Change: 35 stores.
Speaker Change: Half of our stores and really building what we believe is a wave of the future.
Speaker Change: So 2025, we believe will be a tremendously different uses in 2024.
Speaker Change: Okay, great to hear thanks for the color and I'll jump back into the queue.
Speaker Change: Thank you Eric.
Our next question comes from the line of Eric <unk> from Craig Hallum Capital Group. Your line is now open. Please go ahead.
Great. Thank you for taking my questions and congrats on all the restructuring progress.
Speaker Change: Very nice same store sales growth here.
Speaker Change: My questions are on the <unk> portal first one just kind of high level I mean, I know that.
You've sort of discussed this ABB portal, a few times already but I'm just wondering if you could maybe expand a bit more on what's what's new here from your previous ecommerce capabilities.
Speaker Change: I mean is this more of like a centralized our companywide approach to inventory availability and pricing and overall more simplified approach.
Speaker Change: I guess ultimately what I'm getting at is.
Speaker Change: Is this should we be thinking of this BTB portal as more of a gross margin expansion.
Speaker Change: <unk> or are there some incremental revenue opportunities that you see bye bye.
Speaker Change: By adopting this portal.
Speaker Change: Yes, I think its both there.
Speaker Change: And we've worked quite hard on it.
We're opening it up to our commercial customers to.
Speaker Change: To start with.
Speaker Change: It will give them individual pricing.
Speaker Change: Again, a lot of lot of our customers have different pricing schedules for different products. So youll have pricing honest youll have availability.
Right now.
Speaker Change: When individuals want to order a commercial customers. They go through our commercial team.
Speaker Change: And it's very manual hand, driven.
Speaker Change: And so it's really going to a portal right now that's going to take pressure off of our staff, you'll know where the products are although know what the pricing is so it will give our staff much more time to go to facilities to work with our customers to look for new customers, but we believe that that's the wave of the future like anything else.
Speaker Change: The industry is maturing tremendously.
Speaker Change: And it's something that I mean, it's nothing different than you see in most industries, new individuals', usually don't order through commercial salespeople. They they go online and they order unless they have questions and they all have their direct.
Speaker Change: The direct salespeople, so I believe its ease of use.
Speaker Change: It's finding different products that they need.
Speaker Change: And it's just giving grow jet way more color on the other side of it we know what's coming in so we know what products to properly stock were to have these products.
Speaker Change: It's just it's <unk> to point out and it should increase margins for us because the products will be in the places we need it to shipping will be much easier.
Speaker Change: And I think the customers again, we will enjoy it much it'll be much easier for our customers to order transact business on the other side of it. We're also doing is we're also starting to open up <unk> portals for individual products.
Speaker Change: <unk>.
Speaker Change: For any sized growers, so opposed to having going online going online and looking through.
Speaker Change: Website. So you can go direct websites with a learn how to use our products there'll be teaching Pcs to our customers.
Speaker Change: And it will also open up again individual products to many of the growth within the country.
Speaker Change: Well, that's all very helpful color.
Speaker Change: In terms of the margin opportunity with this being a portal in.
Speaker Change: And to point out here, if we think of that versus the.
Speaker Change: More traditional brick and mortar business, how should we think about the potential difference.
Margin, obviously I know you guys haven't launched this yet so I'm not looking for an exact number but if you can kind of help us understand maybe a reasonable range, whether that's on a gross margin or EBITDA margin basis. However, you want to take it just wondering if you can help give us a bit more color of kind of what you're anticipating.
Speaker Change: From a margin perspective, but just maybe to be portable.
Speaker Change: Yes, I think more on the margin side youre going to see cost savings both to our customers and to project.
Speaker Change: The manual again, we need more employee manual how we do fly Fi portals. So I think products will be selling for the same price whether individuals who are coming into the historical or shipping them out of our warehouses.
Speaker Change: So its still to be determined.
Speaker Change: But once again with dealing with the <unk> products are proprietary brands as opposed to other brands. The margins are certainly higher than they are in the 40 as opposed to whether it's in <unk> or <unk>. So youll see a balancing of margins going forward that we believe in 2025 will be whether it's the high <unk> or low thirty's.
Speaker Change: And I think that is.
Speaker Change: If you unpack or even our margins in the third quarter.
Speaker Change: Again, we sold through $12 million of products.
Speaker Change: <unk>, bringing bringing inventory down tremendously and selling a lot of products at a loss during the quarter related to rationalize their inventory to get ready for 2025.
Speaker Change: With all these store closures.
Speaker Change: Alright, thanks for the color and congrats again on the progress.
Speaker Change: Thank you Eric.
Speaker Change: Just a reminder, before we proceed if you wish to ask a question. Please press star one.
Speaker Change: And the next question comes from the line of Mr. Mark Smith from Lake Street Capital Markets. Your line is now open. Please go ahead.
Mark Smith: Hi, guys.
Mark Smith: Darren first question for me.
Mark Smith: Just around customer retention from the closed stores any idea of how much you were able to retain and is that what really helped drive some of the comp is customer shifting over to these stores that are still on the comp base.
Speaker Change: I think it certainly is as Mark what we always said to Wall Street as we believe that we will retain a majority of the commercial customers.
Speaker Change: Certainly not walk into one of the reasons that we're opening these portals.
Speaker Change: As for the walk in customers and stores that we closed and we will ship to them.
Speaker Change: It makes it much easier, but we are starting to retain customers from store closures.
Speaker Change: 12, 5% same store sales in the third quarter was certainly a nice surprise for <unk>.
Speaker Change: A very weak quarter last year, but we believe the same store sales growth will continue.
Speaker Change: We do believe we're starting to see a very small turn in the industry right now whether firstly it grow Jen.
Speaker Change: So we look forward to getting the restructuring behind us we still have another another couple of months and we believe that we should have most of it complete by the end of the year. So we look forward to really sharing our progress in 2025, we did we did close all <unk> stores, we did close I mean, all 12 stores.
Speaker Change: Within the three month span.
Speaker Change: In 19 stores in the last six months, but we've been pretty hard at work.
Speaker Change: But we are starting to retain customers they are buying our brands.
Speaker Change: We feel pretty comfortable where we are right now with same store sales on a go forward basis.
Speaker Change: Perfect and a follow up to that and you cannot pay didn't talked about it a little bit which is just trying to get a feel for the health of your customers and kind of spending habits commercial land walk in.
Speaker Change: Today.
Speaker Change: Kind of how do you feel like your customers are doing a machine of investments back into operation to grow operations here.
Speaker Change: Anything that you can give us as to what youre seeing in the health of the industry today.
The positives are receivables has been we're collecting our receivables. We also are increasingly receivables, but having very little issues with getting paid certain areas.
Speaker Change: It's always a positive for <unk> as you can see we are.
Haven't taken.
Speaker Change: We havent wrote not many can receivables were pretty.
Speaker Change: We're conservative in ways.
Speaker Change: With cut with longstanding customers we.
Speaker Change: Always try to help.
Speaker Change: The industry is tough theres been very little money raised in the last couple of years.
Speaker Change: We're still looking forward to some positive news from from the government. It's been extremely tough sledding. When it comes to that every time you think you believe things are turning on a legislature crump they don't.
Speaker Change: But president elect Trump has said that he believes on a state by state and that you will change the law.
Speaker Change: We look back at the last four years under the Democratic regime, but nothing has got not so.
Speaker Change: After we're cautiously optimistic and a lot of different ways.
Speaker Change: We do believe that will bring money back into the industry, whether it's the state back whether its rescheduling, whether it's the government staying out of it and leaving it state by state. So we have.
Speaker Change: If you ask me, it's been very tough sledding out there I think we've navigated wonderfully we've kept up we've kept our balance sheet.
Speaker Change: Great and a great place to go forward certainly not happy with the price of the stock right now, but we certainly believe that performance will will take care of that down the road. So we just finished our our share repurchases to swap out $6 million of stock. We believe that our stock was trading at a point where.
Speaker Change: But it didn't make much sense. So again, we go into <unk>, we finished the year very optimistic.
Speaker Change: What we've done in the last couple of years, and where we're going in the future.
Speaker Change: Excellent. Thank you.
Speaker Change: There are no more questions at this time, please continue Mr. Gary Landbank.
Speaker Change: Well. Thank you for joining us today, we look forward to updating you on our progress on our year end call.
Speaker Change: And we feel our shareholders and employees.
Speaker Change: A happy and healthy upcoming holiday season.
Speaker Change: Thank you for attending today, and we look forward to look forward to closing the year and then starting 2025 strategy. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.