Q3 2024 GrowGeneration Corp Earnings Call [part 2]

November 12, 2024

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Jamie: Welcome to the best friends into Maine, which 10 franchise Jamie.

Jamie: Yeah.

Speaker Change: Girl generation right.

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Speaker Change: Manny you Fool me.

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Speaker Change: EV Brown from <unk>.

Speaker Change: J M.

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Speaker Change: Oh journey now.

Youre welcome.

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More.

Speaker Change: If I had 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.

Speaker Change: We saw continued improvements in our business within Michigan, Oregon, and California markets and observed challenges in Oklahoma in May.

Speaker Change: Relative to the strength of the third quarter same store sales turned positive for the full fiscal year to date through September 30.

Speaker Change: 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: Surprise Aerie 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. This was driven by continued market adoption of our proprietary brands.

Speaker Change: <unk> charcoal drip hydro and the harvest company.

Speaker Change: We remain laser focused on delivering 35% of sales in 2025 to be driven from our proprietary brands.

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.

Operator 1: Welcome to Cision. Please hold for- Welcome to the conference center. May I know which conference are you joining?

Europe Hydro and the harvest company.

We remain laser focused on delivering 35% of sales in 2025 to be driven from our proprietary brands.

Gregory Sanders: GrowGeneration Corporation Earnings Call.

Jamie: 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.

Operator 1: GrowGeneration. All right. May I know your full name, please?

Speaker Change: 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.

Gregory Sanders: Sorry, can you repeat?

Operator 1: May I know your full name?

David Brown: David Brown from Aiera, A-I-E-E-R-A.

Operator 1: David Brown from Aiera. I'll join you now.

Speaker Change: Gross profit margin was 21, 6% for the third quarter of 2024 compared to 29, 1% for the third quarter of 2023 with.

Gregory Sanders: Thank you.

Operator 1: You're welcome.

Speaker Change: Within margin, we incurred at 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 addition, we incurred a 227 basis point impact from heavily discounted sales of discontinued inventory in Q3.

Gregory Sanders: More satisfied to report that our Q3 same-store sales metric increased by 12.5% year over year. For GrowGen, this marks the first quarter of positive same-store sales in three years. We saw continued improvements in our business within Michigan, Oregon, and California markets, and observed challenges in Oklahoma and Maine. Relative to the strength of the Q3, same-store sales turned positive for the full fiscal year to date through 30 September 2024. Cultivation and gardening net sales were $41.4 million for the Q3 of 2024, compared to $48 million for the comparable year-ago period. Proprietary brand sales increased to 23.8% of cultivation and gardening sales for the Q3 of 2024, compared to 19.4% for the Q3 of 2023. A 4.4% improvement. This was driven by continued market adoption of our proprietary brands, including Char Coir, Drip Hydro, and The Harvest Company.

Speaker Change: Gross profit margin was 21, 6% for the third quarter of 2024 compared to 29, 1% for the third quarter of 2023.

Speaker Change: Which also contributed to our ability to reduce inventory by $12 million in the period.

Speaker Change: Within our restructuring initiatives, we are revising our product mix to align the business to execute to 35% proprietary brand sales for next year.

Speaker Change: Which also contributed to our ability to reduce inventory by $12 million in the period.

Speaker Change: We expect that this initiative, which will carry into the fourth quarter will have an impact on fourth quarter margin as well, but we will allow the business to report a sustainably higher gross profit percent in 2025.

Speaker Change: Within our restructuring initiatives, we are revising our product mix to align the business to execute to 35% proprietary brand sales for next year.

Speaker Change: Another area worth noting is that we continue to realize steady improvements in expenses as a result of our strategic rationalization efforts.

Speaker Change: Store 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: Another area worth noting is that we continue to realize steady improvements in expenses as a result of our strategic rationalization efforts.

Speaker Change: Meanwhile, selling general and administrative expenses for the quarter were $7 4 million compared to $7 6 million in the third quarter of 2023.

Gregory Sanders: We remain laser-focused on delivering 35% of sales in 2025 to be driven from our proprietary brands. For Q3, 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. Net sales for the commercial fixtures for our Storage Solutions segment increased by 2.9%, $8.6 million for Q3 2024, compared to $7.6 million for the last year quarter. This increase was largely due to timing of revenue recognition on various large projects. Gross profit margin was 21.6% for Q3 2024, compared to 21.1% for Q3 2023. Within margin, we incurred a 381 basis point impact to gross profit margin from closed-door liquidation sales and freight expenses related to closures of 12 retail stores in the period.

Speaker Change: Store 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: 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 severance and other restructuring costs to further optimize our operating model.

Speaker Change: 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>.

Speaker Change: We expect to communicate additional cost improvements in Q4, as we position the business for 2025 and beyond.

Speaker Change: Depreciation and amortization was $5 million for the third quarter of 2024 compared to $3 6 million in the second quarter of 2020 for.

Speaker Change: Frances and other restructuring costs to further optimize our operating model.

Speaker Change: We expect to communicate additional cost improvements in Q4, as we position the business for 2025 and beyond.

Speaker Change: 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.

Speaker Change: Depreciation and amortization was $5 million for the third quarter of 2024 compared to $3 6 million in the second quarter of 2020 for.

Speaker Change: In addition, we recorded a $220000 impairment, which was fully related to leases of closed stores in the third quarter.

Speaker Change: 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.

Speaker Change: Net loss was $11 4 million for the third quarter of 2024 or negative <unk> 19 per share compared to a net loss of $7 3 million or negative <unk> 12 per share in the third quarter of 2023.

Speaker Change: In addition, we recorded a $220000 impairment, which was fully related to leases of closed stores in the third quarter.

Speaker Change: Adjusted EBITDA as defined in our press release was negative $2 4 million compared to negative $1 9 million in the same period last year.

Gregory Sanders: Within our restructuring initiatives, we are revising our product mix to align with the anticipated 35% of proprietary brand sales for next year. We expect that this initiative, which will carry into Q4, will further enhance margin as well and allow the business to report a sustainably higher gross profit percent in 2025. Another area worth noting is that we continue to realize many improvements as a result of our strategic rationalization efforts. Store and other operating expenses in Q3 declined 13.9% to $11 million compared to $13 million in Q3 2023. Meanwhile, selling, general, and administrative expenses for the quarter were $7.4 million compared to $7.6 million in Q3 2023. Meanwhile, selling, general, and administrative expenses for the quarter were $7.4 million compared to $7.6 million in Q3 2023.

Speaker Change: 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: Adjusted EBITDA as defined in our press release was negative $2 4 million compared to negative <unk> 9 million in the same period last year.

Speaker Change: During the quarter, we utilized $1 8 million to repurchase company shares.

Speaker Change: Turning to the balance sheet.

Speaker Change: As of September 32024, the company had $55 2 million of cash cash equivalents and marketable securities and no debt.

Speaker Change: 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.

Speaker Change: During the quarter, we utilized $1 8 million to repurchase company shares.

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

We expect to provide full year 2025 guidance for net revenue and adjusted EBITDA on our 2024 year end conference call.

Speaker Change: As Darin mentioned, we are reiterating our full year 2024 guidance for net revenue.

Speaker Change: To be in the range of $190 million to $195 million.

Speaker Change: In closing the financial position of grow generation remains strong we've made significant progress towards restructuring the business for long term profitability 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.

Gregory Sanders: SG&A was slightly up in Q2 of 2024 at $7.1 million. This is largely due to expenses related to several other restructuring and optimization efforts. We expect to communicate additional costs in Q4 as we position the business for 2025 and beyond. Depreciation and amortization was $5 million for Q3 of 2024 compared to $3.6 million in Q2 of 2024. This increase is due to acceleration of certain depreciable assets from our restructuring initiatives through year-end, for which we expect to retire said assets at 31 December. We recorded a $220,000 impairment, which was fully related to leases at closed stores in Q3. Net loss was $11.4 million for Q3 of 2024, -$0.99 per share, compared to a net loss of $0.3 million or -$0.07 per share in Q3 of 2023.

Speaker Change: Our primary focus is long term margin expansion cost reduction and generating opportunities for positive topline growth.

Closing the financial position of grow generation remains strong we've made significant progress towards restructuring the business for long term profitability in the third quarter.

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.

Speaker Change: Our primary focus is long term margin expansion cost reduction and generating opportunities for positive topline growth.

Speaker Change: I will now turn the call back over to Darin for closing remarks.

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.

Speaker Change: Okay.

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

Darin: As we wrap up our third quarter call I want to emphasize our excitement and confidence and grow generations path forward the.

Speaker Change: I will now turn the call back over to Darin for closing remarks.

Darin: The progress we've made through our restructuring efforts.

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

Darin: Put us on a stronger footing to drive revenue growth optimize margins and build a leaner more profitable company.

Speaker Change: As we wrap up our third quarter call I want to emphasize.

Speaker Change: And confidence grow generations path forward the.

Darin: Our focus on expanding high margin proprietary brands advancing our digital transformation and streamlining our retail footprint.

Speaker Change: The progress we've made through our restructuring efforts.

Speaker Change: Put us on a stronger footing to drive revenue growth optimize margins and build a leaner more profitable company.

Darin: We're already showing results and we're committed to maintaining this momentum into 2025.

Gregory Sanders: Adjusted EBITDA as defined in our press release was -$2.4 million compared to -$0.7 million in the same quarter last year. Turning to the balance sheet, as of 30 September 2024, the company had $55.2 million in cash and cash equivalents and marketable securities, no debt. During the quarter, we utilized $1.8 million to repurchase company shares. We continue to maintain a strong cash position. We do not foresee any near-term working capital gains. As Darren mentioned, we are reiterating our full year 2024 guidance for net revenue to be in the range of $190 to $195 million. We continue to maintain a strong cash position.

Speaker Change: Our focus on expanding high margin proprietary brands advancing our digital transformation and streamlining our retail footprint.

Darin: 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.

Speaker Change: Already show in the results and we're committed to maintaining this momentum into 2025.

Darin: 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.

Speaker Change: 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.

Darin: 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: I'd also like to thank our investors.

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.

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 a pump that Johan has been great.

Darren Lampert: Do not respect.

Gregory Sanders: To provide full year 2025 guidance for net revenue.

Speaker Change: 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.

Darren Lampert: As Darren mentioned, we are reiterating our full year 2024 guidance for net revenue.

Gregory Sanders: On our 2024 guidance for net top line.

Darren Lampert: To be in the range of 100 to.

Gregory Sanders: In closing, the financial position of GrowGeneration remains strong.

Speaker Change: Should you wish to decline from the polling process. Please press the star followed by the numbers.

Speaker Change: Thank you.

Darren Lampert: We've made significant progress towards restructuring the business for long-term profitability in Q3.

Speaker Change: 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 a pump that Johan.

Gregory Sanders: To provide full year 2025 guidance for net revenue.

Speaker Change: If youre using a speakerphone please ms <unk> handset before pressing any keys.

Darren Lampert: Our primary focus is long-term margin expansion.

Speaker Change: One moment. Please for your first question.

Gregory Sanders: In closing, the financial position of GrowGeneration remains strong.

Speaker Change: Your first question comes from the line of Brian Nagel from Oppenheimer. Your line is now open. Please go ahead.

Speaker Change: Should you wish to decline from the polling process. Please press the star followed by the numbers.

Darren Lampert: We've made significant progress towards restructuring the business.

Speaker Change: If youre using a speakerphone please ms handset before pressing any key.

Gregory Sanders: For long-term profitability in Q3.

Darren Lampert: Our primary focus is long-term margin expansion.

Brian Nagel: Thank you Tim.

Gregory Sanders: Cost reduction, generating opportunities.

Gregory Sanders: For positive top line growth.

Gregory Sanders: We are dedicated to growing the business on a more sustainable and leaner footing.

Gregory Sanders: Enabling us to deliver profitable growth for our shareholders.

Speaker Change: One moment. Please for your first question.

Brian Nagel: Couple of questions if I could first.

Gregory Sanders: I will now turn the call back over to Darren to close our call.

Speaker Change: Your first question comes from the line of Brian Nagel from Oppenheimer. Your line is now open. Please go ahead.

Brian Nagel: First off I guess, just numbers and you talked about.

Brian Nagel: Ongoing rationalization of the store base could you remind us.

Darren Lampert: Thank you, Greg. Thank you to everyone for joining us today. As we wrap up our Q3 call, I want to emphasize our excitement and confidence in GrowGeneration's path forward. The progress we've made through our restructuring efforts have put us on a stronger footing to drive revenue growth.

Brian Nagel: Yeah, where you want to get too.

Darin: Okay.

Speaker Change: And when that will be done.

Speaker Change: Couple of questions if I could.

Speaker Change: And then my second question just bigger picture.

Speaker Change: First off I guess just numbers.

Speaker Change: Talked about.

Speaker Change: All right Darren with respect to the continued build out rollout right Jerry brands, which seems like it's happening quite quickly.

Speaker Change: <unk> rationalization of the store base could you remind us where you want to get too.

Speaker Change: And when that will be done.

Darren Lampert: Optimize margins, and build a leaner, more profitable company.

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: And then my second question just bigger picture.

Darren Lampert: Our focus on expanding high-margin proprietary brands, advancing our digital transformation, and streamlining our retail footprint is already showing results, and we're committed to maintaining this momentum into 2025.

Speaker Change: Hi, Darren with respect to the continued build out rollout certain brands, which seems like it's happening quite quickly.

Speaker Change: Are there any questions.

Sure.

Speaker Change: How could you maybe talk about the portfolio as you guys Youre, adding these new brands. How is the sales performance of the new brands added versus maybe some of the legacy brands.

Speaker Change: Are you selling <unk> products.

Speaker Change: Products that appeal to different customers. Thank you.

Brian Nagel: 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 is 31.

Darren Lampert: Our focus on expanding high-margin proprietary brands-

Darren Lampert: Our entire team remains dedicated to executing on this strategic plan, and I'm deeply grateful for their hard work and adaptability as we position GrowGeneration for long-term success. 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. 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: Are there any questions.

Speaker Change: Or.

Speaker Change: I know you discontinued 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 is 31.

Brian Nagel: Not to say that we may not close a couple more stores next year.

Speaker Change: <unk> has has changed tremendously as we evolve in the industry growth <unk> has now let's go to name Raytheon for most cultivators.

Speaker Change: Not to say that we may not close a couple more stores next year.

Speaker Change: So the amount of stores is certainly not necessarily around the country as we build out distribution.

Speaker Change: Jen has has changed tremendously as we evolved in the industry growth <unk> has now let's go to name Raytheon for most cultivators.

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, but that will probably be the whole nine yards.

Speaker Change: So the amount of stores is certainly not necessarily around the country as we build out distribution and.

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'll see a couple more store closings next year.

Operator 2: Your first question comes from the line of Brian Nagel from Oppenheimer. Your line is now open. Please go ahead.

Speaker Change: With regards to private label.

Speaker Change: <unk> has been has spent the last three years.

Speaker Change: Through R&D and <unk>.

Speaker Change: And testing products within cultivation around the country I think youre starting to see right now is everything coming together.

Speaker Change: That will probably be the whole nine yards.

Brian Nagel: With regards to private label.

Brian Nagel: <unk> has been has spent the last three years.

Darren Lampert: Thank you.

Operator 2: 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 a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.

Speaker Change: It takes six months to a year with certain of these products go into testing and certain facilities to get some of our customers need in Switzerland or adopt.

Speaker Change: Through R&D and <unk>.

Brian Nagel: A couple questions if I could. First off, I guess, you know, first, you talked about this kind of ongoing rationalization of the store base. Could you remind us where you want to get to and when that'll be done? My second question, I guess bigger picture, Darren, with respect to the ongoing rationalization of the store base, could you remind us where you want to get to and when that'll be done?

Speaker Change: And testing products within cultivation around the country and what Youre starting to see right now is everything coming together.

Speaker Change: These different.

Speaker Change: Current products that we're bringing to market and different sides of the industry, whether it be on the nutrient side of it which is feeding the plant.

Brian Nagel: It takes it takes six months to a year with certain of these products go into testing and certain facilities to get some of our customers see the switch or adopt.

On the soil side, a bit on the lighting side of it and harvest co which is new.

Speaker Change: These different.

Speaker Change: A different product that we're bringing to market and different sides of the industry, whether it be on the nutrient side of it which is feeding the plant on the.

Speaker Change: This is a new brand for us on the.

Speaker Change: Early on the <unk> side didn't really on the ancillary side of it.

Darren Lampert: Could you maybe talk about the performance period? You're adding these new brands. How is the sales performance of the new brands adding versus maybe some of the legacy brands?

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: On the soil side of it 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, and really on the ancillary side of it.

Brian Nagel: Are you seeing different products that appeal to different customers? Thank you.

Speaker Change: Just giving our customers more optionality, so what you're 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: You are looking at products that are the <unk>, 40% margin business really really opposed to 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. Thank you blend in the high <unk> to low <unk>.

Darren Lampert: Yeah, I can start, Brian. We have 31 stores right now, so we're down from about 65 stores. We closed 19 stores this year. When you look year over year, we're down 25 stores. I think we're in a pretty comfortable spot right now with 31. Not to say that we may not close a couple more stores next year. GrowGen has changed tremendously as we evolve in the industry. GrowGen is now a go-to name right now for most cultivators. The amount of stores is certainly not necessary around the country as we build out the distribution and we build out our B2B network. We're comfortable right now. We're able to service our customers around the country right now from our locations, certainly our bigger locations.

Speaker Change: But when you start looking at the margin picture for <unk> yet.

You are looking at products that are that <unk> is 40% margin business really really opposed to some low twenties on a lot of the other products from selling so we do believe going into 2025, and you start seeing a balancing of our margins. Thanks, you've landed in the high <unk> to low <unk>.

Speaker Change: Especially when we're looking at 35% of our what we believe sales next year will be private label products.

Speaker Change: With that also we continue.

Speaker Change: To work with the best of breed distributors manufacturers out there.

Speaker Change: Especially when we're looking at 35% of our what we believe sales next year will be private label products.

Speaker Change: And working very closely with our partners are selling their brands to our customers.

Speaker Change: We've always said that <unk>, given the choice and our products are not always the choice for some of our customers.

Speaker Change: With that also we continue.

Speaker Change: To work with the best of breed distributors manufacturers out there.

Speaker Change: And we sell to our customers what they're looking for so we keep a very open I.

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.

Darren Lampert: I do believe you'll see a couple more store closings next year, but that'll probably be the hallmark of ours. With regards to private label, GrowGen has spent the last 3 years through R&D and testing products in cultivation around the country. We're just starting to see right now is everything coming together. It takes 6 months to a year with certain of these products going through certain facilities to get some of our customers the switch or adopt different products that we're bringing to market in different sides of the industry, whether it be on the nutrient side of it, or seeding the plants, on the soil side of it, on the lighting side of it, and the harvest, which is new for us, really on the pick and shovel side of it. Really on the answer side of it.

What we sell.

And our products are not always the choice for some of our customers.

Speaker Change: Thanks, Darrin I appreciate all the color.

Brian Nagel: Thanks, Brian Good evening.

Speaker Change: And we sell to our customers what they're looking for so we keep a very open.

Speaker Change: What we sell.

Speaker Change: Your next question comes from the line of Avon <unk> from Alliance Global Partners. Your line is now open. Please go ahead.

Speaker Change: Thanks, Darrin I appreciate all the color.

Thanks, Brian Good evening.

Speaker Change: Hi, good evening and thank you for the question.

Speaker Change: 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 can give on that initiative would be helpful. There. Thank you.

Speaker Change: Your next question comes from the line of Avon <unk> from Alliance Global Partners. Your line is now open. Please go ahead.

Speaker Change: Hi, Good evening and thank you for the question. So the 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 can 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.

Speaker Change: 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.

Darren Lampert: We're just giving our customers more options now. What you're seeing right now is both of our customers adopting some of our products, and we're also selling into distribution. I think you're seeing sales increasing from both ends. When you start looking at the margin picture for GrowGen, you're looking at products that GrowGen's 40% margin business really opposed to some of the other products we're selling. We do believe going into 2025 that you'll start seeing a balancing of our margins that should land in the high 20s, low 30s, especially when we're looking at 35% of what we believe the sales next year will be private label products. With that also, we continue to work with the best of breed distributors and manufacturers out there, and working very closely with our partners on selling their brands to our customers.

Speaker Change: Yes, I think theres, a tremendous amount of opportunity and I think.

Speaker Change: Built we've built a network around the country right now.

Speaker Change: As this industry grows up and evolve.

Speaker Change: We sell best of breed products, albeit either grow gen products or or vendor products, but on the other side of it.

It gets more personalized and a lot of ways grows and becomes the go to whether it's accounting, whether it's credit whether its product whether its distribution.

Speaker Change: We have a very vibrant software system with <unk> accounting systems, we give credit to all our customers.

Speaker Change: We built we've built a network around the country right now, where we sell best of breed products, albeit either grow gen products or.

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: Or vendor products, but on the other side of it.

Speaker Change: We have a very vibrant software system to grow Gen accounting systems, we give credit to all 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: So it's just again, it's making it easier for our customers to shop.

Speaker Change: And I think that's what it's about in this day and age getting products to our customers.

Speaker Change: We work with our customers like anything else, we have a very big balance sheet, we had $55 million of cash on our balance sheet right now we have the largest inventory positions in the <unk>.

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: The industry, so the plants never sleep and our customers don't sleep like anything else, where they're 24 seven to fill orders.

Speaker Change: We work with our customers like anything else, we have a very big balance sheet $55 million of cash on our balance sheet right now we have the largest inventory positions in the <unk>.

Speaker Change: And do what we can offer our customers on the other side of it we have a extremely talented commercial team at growth yet.

Speaker Change: In the industry.

Darren Lampert: We've always said that GrowGen gives a choice. Our products are no different. We sell to some of our customers, and we sell more products with their labels. We keep a very lean eye with what we sell. We've always said that GrowGen gives a choice.

Speaker Change: The plants never sleep, and our 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 extremely talented commercial team at growth yet.

Darren Lampert: And our products-

Speaker Change: Our commercial team is that the facilities on a daily basis.

Brian Nagel: Thanks, Darren. I appreciate all the color.

Darren Lampert: Aren't always the choice for some of our customers.

Darren Lampert: Thanks, Brian. Have a good evening.

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. We're also helping them grow we're helping them with yield we're helping them with quality.

Darren Lampert: We sell to our customers what they're looking for. We keep a very open eye with what we sell.

Operator 2: Your next question comes from the line of Aaron Grey from Alliance Global Partners.

Speaker Change: Our commercial team is that the facilities on a daily basis.

Eric Des Lauriers: Thanks, Darren. I appreciate all the color.

Operator 2: Your line is now open. Please go ahead.

Eric Des Lauriers: Thanks, Brian. Have a good evening.

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 are.

Aaron Grey: Hi, good evening, and thank you for the questions. First question for me.

Speaker Change: Our partners products, but again, we have a team at <unk> I believe as part on in the industry right now.

Operator 2: Your next question comes from the line of Aaron Grey from Alliance Global Partners.

Aaron Grey: I just wanted to hear more details about your efforts to build out the commercial business, increasing the sales with some of the larger players in MSOs.

Aaron Grey: Your line is now open. Please go ahead.

Darren Lampert: That sounds like there's still a lot of white space opportunity. Any color you could give on that initiative would be helpful there. Thank you. Darren, I think there's a tremendous amount of opportunity, and I think, as this industry grows up and evolves, it gets more commercialized in a lot of ways. GrowGen becomes the go-to, whether it's accounting, whether it's credit, whether it's product, whether it's distribution. We've built a network around the country right now where we sell best-of-breed products, be it either GrowGen products or our vendor products. On the other side of it, we have a very vibrant software system, a GrowGen accounting system. We give credit to our customers. It's just, again, it's making it easier for our customers to shop.

Speaker Change: <unk>, new innovative products or again are.

Derek: Okay, Great appreciate that color there Derek.

Speaker Change: Second question for me I know you touched briefly on private label continues to perform well for your 24% of sales. So can you just breakdown in terms of as we think about where it is now against that 35% you said new products and expanded distribution could you help us maybe.

Speaker Change: Our partners products, but again, we have a team at <unk> I believe as part of them in the industry right now.

Brian Nagel: Okay, Great appreciate that color there Derek.

Speaker Change: Second question from me I know you touched briefly on private label continues to perform well for your 24% of sales. So can you just breakdown in terms of as we think about where it is now against that 35% you said 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: The legacy Skus continued to drive growth, there and higher mix of sales. Thank you.

Speaker Change: I think it's a combination of both there.

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: Again, we don't really look at it as legacy Skus on most of our Skus are still growing so there's 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, but chaco is coming out with innovative products, whether it's a 70 30 cocoa poorly mixed right now.

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.

Darren Lampert: I think that's what it's about these days, getting products to our customers in a timely fashion, best pricing with credit, and just making their job easier. Our accounting department consolidates their bills from facilities and facilities. When we work with our customers, like anything else, we have a very big balance sheet, $55 million of cash on our balance sheet right now. We have a large inventory position in the industry. The plant never sleeps, and our customers don't sleep. Like anything else, we're there 24/7 to fill orders and do what we can for our customers. On the other side of it, we have an extremely talented commercial team at GrowGen. Our commercial team is at the facilities on a daily basis, answering questions about new products coming to market, helping out if there's issues within the grow facilities.

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, but chaco 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 heartfelt so I think youre seeing growth in our.

Speaker Change: And you'll also see cocoa coins and as we told you as we've been talking about drip powders come to market at the beginning of the year that are starting to grow very quickly.

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. We don't believe that products that we've launched in a couple of user stagnating I think youre also growing.

So harsco, so I think youre seeing growth in our.

Speaker Change: I think youll see.

Speaker Change: A nice number within the fourth quarter on growth of our private label Division.

Speaker Change: In our product has been out for a few years, but you'll also see new products coming to market. So I think youll see a mix.

Speaker Change: It's tracking much higher than it was last quarter. So we believe that 35% is attainable next year and from there. We still do believe that you may see it in the <unk> 40 is a couple of years later.

Speaker Change: <unk> believes that products that we've launched in a couple of user stagnating I think youre also growing.

Speaker Change: Youll see a nice number within the fourth quarter on growth of our private label Division.

Aaron Grey: It's not only that we're selling products to our customers, we're also helping them grow. We're helping them with yield. We're helping them with quality through innovative products or, again, our partners' products. Again, we have a team at GrowGen that I believe is partner number one in the industry right now. Take it. Appreciate that color there, Darren. Second question for me, I know you touched briefly on private label. It continues to perform well for you, 24% sales. Can you just break down in terms of, as we think about where it is now, getting to that 35%, you said new products and expanded distribution. Could you help us maybe quantify the drivers?

Speaker Change: So again, we couldnt be any more excited with where we are on the private label product I think.

Tracking much higher than it was last quarter. So we believe that 35% is attainable next year and from there. We still do believe that you may see it in the <unk> a couple of years later.

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.

Speaker Change: So again, we couldnt be any more excited with where we are on the private label product I think.

Speaker Change: Facility managers and facilitators and so we're out there right now and I think you know more than any how hard we're working on.

Speaker Change: It certainly helps with sales of our commercial division is out selling it we <unk>.

Speaker Change: On the business and we spent the last three years restructuring road yet.

Derek: Have individuals that go to facilities as I said earlier to Bryan facility managers and facilitators.

Speaker Change: I'll be at closing.

Speaker Change: Close to 40 stores in the third.

Speaker Change: So we're out there right now and I think you know more than any how hard we're working.

Speaker Change: <unk> 35 stores.

Speaker Change: Half of our stores.

Speaker Change: And really building what we believe is a wave of the future.

Speaker Change: On the business then we spent the last three years restructuring road yet.

Speaker Change: So 2025, we believe will be a tremendously different yet in 2024.

Darren Lampert: How much of that should we think about being driven by the new products and innovation that you guys have going versus just the Lake and Skeets continued to drive growth there and higher mix of sales? Thank you. I think it's a combination of both, Aaron. We don't really look at it. Legacy SKUs, most of our SKUs are still growing, so there's not much legacy in it. Most of them have come to market in the last few years that are really driving sales except for Char Coir. Char Coir is coming out with innovative products, whether it's the 70/30 Coco-Perlite Blend right now, and we also see Coco Coins. As we told you, as we've been talking about Drip Hydro POWDERS come to market at the beginning of the year that are starting to grow very quickly, and also Hard Shell.

Speaker Change: I'll be at closing.

Speaker Change: Dose to 40 store.

35 stores.

Speaker Change: Okay, great to hear thanks for the color and I'll jump back into the queue.

Speaker Change: Half of our stores.

Speaker Change: And really building what we believe is a wave of the future.

Speaker Change: Thank you Eric.

Speaker Change: So 2025, we believe will be a tremendously different yet in 2024.

Speaker Change: Your next question comes from the line of Eric <unk> from Craig Hallum Capital Group. Your line is now open. Please go ahead.

Speaker Change: Okay, great to hear thanks for the color and I'll jump back into the queue.

Speaker Change: Thank you Eric.

Speaker Change: Great. Thank you for taking my questions and congrats on all the restructuring progress.

Speaker Change: Your next question comes from the line of Eric <unk> from Craig Hallum Capital Group. Your line is now open. Please go ahead.

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 sort of discussed this.

Speaker Change: Great. Thank you for taking my questions and congrats on other restructuring progress.

Speaker Change: 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: 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.

Speaker Change: I mean is this more of like a centralized our company wide approach to inventory availability and pricing.

Speaker Change: Sort of discussed this.

Speaker Change: 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 e-commerce capabilities.

Speaker Change: We're all more simplified approach.

Darren Lampert: I think you're seeing growth in our products that have been out for a few years, but you're also seeing new products coming to market. I think you'll see much higher than what last quarter that we launched with some of the innovation that's available next year. From there, we still do believe that you may see this at least a couple of years later. Again, we couldn't be any more excited with where we are on the private label products. I think it certainly helps with sales, and commercial division is out selling it. We have individuals that go to facilities, as I said earlier to Brian, facility managers and facilitators. We're out there right now. I think you know more than any how hard we're working and really building what we believe is the wave of the future.

Speaker Change: I guess ultimately what I'm getting at is.

Speaker Change: Is this should we be thinking of <unk> portal as more of a gross margin expansion initiative or are there some incremental revenue opportunities that you see bye bye.

Speaker Change: I mean is this more of like a centralized our company wide approach to inventory availability and pricing.

Speaker Change: They're all more simplified approach.

Speaker Change: I guess ultimately what I'm getting at is.

Speaker Change: By adopting this portal.

Speaker Change: Is this should we be thinking of <unk> portal as more of a gross margin expansion.

Speaker Change: Yes, I think it's both era.

Speaker Change: And we've worked quite hard on it.

Speaker Change: We're opening it up just to our commercial customers to.

<unk> or are there some incremental revenue opportunities that you see bye bye.

Speaker Change: To start with.

Speaker Change: It will give them individual pricing.

Speaker Change: By adopting this portal.

Speaker Change: Again, a lot of a lot of our customers have different pricing schedules for different products. So youll have pricing honest youll have availability.

Speaker Change: Yes, I think it's both.

Speaker Change: And we've worked quite hard on it.

Speaker Change: We're opening it up to our commercial customers to.

Speaker Change: Right now.

Speaker Change: To start with.

Speaker Change: When individuals want to order a commercial customers. They go through our commercial team.

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 on it youll have availability.

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 they'll know where the products are although now 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. So we believe that that's the wave of the future like anything else the industry is maturing.

Speaker Change: 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.

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. So we believe that that's the wave of the future like anything else <unk>.

Speaker Change: And it's something that I mean, it's nothing different than you'll 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.

Darren Lampert: 2025, we believe, will be a tremendously different year than 2024.

Operator 2: Your next question comes from the line of Eric Des Lauriers from Craig-Hallum Capital Group.

Speaker Change: The industry is maturing tremendously.

Speaker Change: The direct salespeople, so I believe its ease of use.

Aaron Grey: Okay, great.

Aaron Grey: Your line is now open. Please go ahead.

Darren Lampert: Thanks for calling. I'll turn it back into the queue. Thank you, Aaron.

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 go online and they order all if they have questions and they all have their direct there.

Eric Des Lauriers: Great. Thank you for taking my questions, and congrats on all the restructuring progress and very nice consumer sales growth here.

Speaker Change: It's finding different products that they need.

Speaker Change: And it's just given <unk> 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.

Operator 2: Your next question comes from the line of Eric Des Lauriers from Craig-Hallum Capital Group.

Speaker Change: The direct salespeople.

Eric Des Lauriers: My questions are on the B2B portal.

Speaker Change: Believe its ease of use.

Operator 2: Your line is now open. Please go ahead.

Eric Des Lauriers: First one, just kind of high level, I know you've discussed this B2B portal a few times already, but just wondering if you could maybe expand a bit more on what's new here from your previous e-commerce capabilities. Should we be thinking of this B2B portal as more of a gross margin expansion initiative, or are there some more incremental revenue opportunities that you see by adopting this portal?

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 as shifting will be much easier.

Speaker Change: It's finding different products that they need.

Speaker Change: And it's just given <unk> 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: 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: 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 at this shifting will be much easier.

<unk>.

Speaker Change: For any sized growers, so opposed to having going online going online and looking through web.

Speaker Change: Website. So you can go direct websites, where they will learn how to use our products there'll be teaching teachers to our customers.

Speaker Change: <unk>.

Speaker Change: For any sized growers, so opposed to having going online going online and looking through.

Speaker Change: And it will also open up again individual products to many of the growth within the country.

Speaker Change: So you can go direct websites with a learn how to use our products there'll be teaching Pcs to our customers.

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 it will also open up again individual products to many other growers within the country.

Speaker Change: And to point out here, if we think of that versus the.

Darren Lampert: I think it's both, Eric. We've worked quite hard on it. We're also aiming it up just to our commercial customers to start with, who will give them individual pricing. Again, a lot of our customers have different pricing schedules for different products. You'll have pricing on it, you'll have availability. Right now, when individuals want to order our commercial customers, they go through our commercial team, and it's very manual, hand-driven. It's really going to a portal right now that's going to take pressure off of our staff. They'll know where the products are, they'll know what the pricing is. It'll give our staff much more time to go to facilities to work with our customers, our legitimate customers. We believe that it's a way of the future like anything else.

More traditional brick and mortar business, how should we think about the potential difference in 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.

Speaker Change: Okay. That's all very helpful color.

Speaker Change: In terms of the margin opportunity, what does seem to be portal and <unk>.

Speaker Change: And to point out here.

Speaker Change: We think of that versus the.

Speaker Change: More traditional brick and mortar business.

Speaker Change: Should we think about the potential difference.

I was wondering if you can help give us a bit more color of kind of what you're anticipating.

Speaker Change: 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 this may to report on.

Speaker Change: Yes, I think more on the margin side youre going to see cost savings both to our customers into <unk>.

Speaker Change: Manual again, we need more employees.

Darren Lampert: The industry is maturing tremendously, and it's something that's nothing different than you see in most industries. Individuals usually don't order through commercial salespeople. They go online and they order unless they have questions, and they don't have their direct salespeople. I believe it's just, it's ease of use. It's finding different products that they need, and it's just giving GrowGen way more color on the side of it. We know what's coming in, so we know what products are properly stocked, where to have these products. It's GrowGen 2.0, and it should increase margins for us because the product will be in place when we need it. The shipping will be much easier. I think the customers, again, will enjoy it. It'll be much easier for our customers to order, transact business.

Speaker Change: We do buy buy buy portals, so I think products will be selling for the same price whether individuals are coming into the stores or shipping them out of our warehouses.

Speaker Change: From a margin perspective, but this may to report on.

Speaker Change: Yes, I think more on the margin side youre going to see cost savings both to our customers into <unk>.

Speaker Change: Manual again, we need more employees takes manual do bye bye bye portals.

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.

Speaker Change: <unk> products will be selling for the same price whether individuals are coming into the stores or shipping a matter of our warehouses.

Speaker Change: 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 twenty's or low thirty's.

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 twenty's or low thirty's.

Speaker Change: I think that if you unpack or even our margins in the third quarter.

Speaker Change: Again, we sold through $12 million of products.

Speaker Change: <unk>.

Darren Lampert: On the other side of it, what we're also doing is we're also starting to open up B2B portals for individual products for any size store. As opposed to having individual products in many of the growers that we've discussed.

Speaker Change: Bringing inventory down tremendously and selling a lot of products at a loss during the quarter really to rationalize their inventory to get ready for 2025.

Speaker Change: And I think that if you want packages in our margins in the third quarter.

Speaker Change: Again, we sold through $12 million of products in the third quarter, 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.

With all these store closures.

Speaker Change: Alright, thanks for the color and congrats again on the progress.

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.

Eric Des Lauriers: That's all very helpful, Eric. In terms of the margin opportunity with this B2B portal and I think GrowGen 2.0 here, if we think about that versus the more traditional brick-and-mortar business, how should we think about the potential difference in margin? Obviously, I know you guys haven't launched this yet, so I'm not looking for an exact number, but if you could kind of help us understand maybe a reasonable range, whether that's on a gross margin or even on 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 from a margin perspective with the B2B portal.

Eric: Thank you Eric.

Speaker Change: Just a reminder, before we proceed if you wish to ask a question. Please press star one.

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: 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.

Speaker Change: Hi, guys.

Speaker Change: Darren first question for me.

Speaker Change: 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.

Mark Smith: Yes.

Mark Smith: I think its certainly it is mark.

Mark Smith: Always said to Wall Street, as we believe that we will retain a majority of the commercial customers.

Mark Smith: Certainly not walk ins, but one of the reasons that we're opening these portals.

Mark Smith: As for the walk in customers and stores that we closed and we will ship to them.

Speaker Change: I think it certainly is as Mark what we always said to losses, we believe that we will retain a majority of the commercial customers.

Mark Smith: It's much easier, but we are starting to retain customers from store closures.

Speaker Change: Certainly not walk ins.

Speaker Change: One of the reasons that we're opening these portals.

Mark Smith: 12, 5% same store sales in the third quarter was certainly a nice surprise for <unk> was off a very weak quarter last year, but we believe the same store sales growth will continue.

Darren Lampert: I think more on the margin side, you'll see cost saves both to our customers and GrowGen. Manual, again, you need more employees. It takes manual work to do by portal. I think products will be selling for the same price. There are individuals coming into stores as opposed to, you know, whether they're in our warehouses. It's still needs to be determined. Once again, with dealing with GrowGen products and our brands versus other brands, the margins are certainly higher. They're in the 40s as opposed to whether it's in the 20s or teens. You'll see a balancing of margins going forward that we believe in 2025 will be in the high 40s or low 50s.

Speaker Change: As for the walk in customers and stores that we closed that we will ship to them.

Speaker Change: It's much easier, but we are starting to retain customers from store closures.

Mark Smith: We do believe that we are starting to see a very small turn in the industry right now whether it especially at <unk>.

Speaker Change: 12, 5% same store sales in the third quarter was certainly a nice surprise for grow Gen was off a very weak quarter last year, but we believe the same store sales growth will continue.

Mark Smith: So we look forward to.

Mark Smith: 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.

Speaker Change: We do believe that we are starting to see a very small turn in the industry right now whether firstly it grow gen.

Gregory Sanders: I think that if you want to package our margins in Q3, again, we sold through $12 million of products in Q3, bringing inventory down tremendously and selling a lot of products at a loss during the quarter, really to rationalize our inventory to get it ready for 2025 with all these store closures.

Speaker Change: So we look forward to.

Mark Smith: We did close online stores, we did close I mean, all 12 stores within the three month span.

Speaker Change: 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 online stores. We did close I mean, all 12 stores within the three month span.

In 19 stores in the last six months, so we've been pretty hard at work.

Mark Smith: But we are starting to retaining customers they are buying our brands.

Mark Smith: We feel pretty comfortable where we are right now with same store sales on a go forward basis.

Speaker Change: In 19 stores in the last six months, but we've been pretty hard at work.

Speaker Change: Perfect and a follow up to that and you cannot he 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: But we are starting to retain customers they are buying our brands and we.

Eric Des Lauriers: All right. Thanks for the color. I appreciate it.

Darren Lampert: Thank you, Eric.

Operator 2: Just a reminder, before we proceed, if you wish to ask a question, please press star one.

We feel pretty comfortable where we are right now with same store sales on a go forward basis.

Eric Des Lauriers: All right, thanks for the color. I appreciate it.

Operator 2: 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: Today.

Perfect and a follow up to that and you kind of 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 and walk in.

Speaker Change: Kind of how do you feel like your customers are doing and we're seeing the investments back into operation to grow operations here.

Mark Smith: Hi, guys.

Operator 2: if you wish to ask a question, please press star one.

Speaker Change: Anything that you can give us as to what youre seeing in the health of the industry today.

Mark Smith: Darren, first question from me is 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 in the comp base?

Mark Smith: Today.

Speaker Change: 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. So that's always a positive for <unk> as you can see we haven't taken.

Mark Smith: 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.

Mark Smith: The positives are receivables has been we're collecting our receivables. We also are increasing receivables with having very little issues with getting paid certain areas. So that's always a positive for <unk> as you can see we haven't taken.

Speaker Change: We havent wrote not many could receivables were pretty.

Speaker Change: We're conservative in ways, but with co with long standing customers.

Darren Lampert: Guys, I think it certainly is, Mark. We always said to Wall Street that we believe that we only take the majority of the commercial customers certainly not walk-ins. One of the reasons we're offering these portals is for walk-in customers, most of which are close. Now we'll shift it then maybe next quarter or Q1. We are starting to retain customers for walk-ins. One of the reasons our 12.5% same-store sales in Q3 was certainly a nice surprise for GrowGen. It was a very weak quarter last year. We are starting to see store sales growth will continue. We do believe that we are starting to see a very small turn in the industry right now, whether at Treasury or GrowGen. We look forward to getting the restructuring behind us.

Speaker Change: We always try to help.

Speaker Change: The industry is tough theres been very little money raised in the last couple of years.

Mark Smith: We havent wrote not many can receivables were pretty well.

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 legislative front they don't.

Mark Smith: We're conservative in ways.

Mark Smith: With cut with longstanding customers, we always try to help.

Mark Smith: The industry is tough theres been very little money raised in the last couple of years.

Speaker Change: But president elect Trump has said that he believes on a state by state and that he will change the law and we look back at the last four years under the Democratic regime, and nothing is not not so.

Mark Smith: 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 legislative front they don't.

We're after we're cautiously optimistic and a lot of different ways.

Speaker Change: But president elect Trump has said that he believes on a state by state and that you will change the law and we look back at the last four years under the Democratic regime, and nothing is not so well.

Darren Lampert: We still have another couple months, and we believe that we should have most of it completed by the end of the year. We look forward to really sharing our progress in 2025. We did close all 9 stores. We did close, I mean, all 12 stores within a 3-month span, and 19 stores in the last 6 months. We've been pretty hard at work. We are starting to retain customers. They are buying our brands, and we feel pretty comfortable where we are right now with same-store sales on a go-forward basis.

Speaker Change: We do believe it 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.

Mark Smith: We're after we're cautiously optimistic and a lot of different ways.

Speaker Change: If you ask me, it's been very tough sledding out there I think we've navigated it wonderfully we've kept our.

Mark Smith: We do believe it will bring money back into the industry, whether its to stay back whether its rescheduling, whether it's the government staying out of it and leaving it state by state. So we have.

Speaker Change: 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.

Mark Smith: If you ask me, it's been very tough sledding out there I think we've navigated it wonderfully we've kept our.

Mark Smith: We've kept our balance sheet.

Mark Smith: Perfect. A follow-up to that, and you kind of hinted and talked about it a little bit, which is just trying to get a feel for the health of your customers. I mean, any stats, commercial and walk-ins today? How do you feel like your customers are doing and overseeing your investments back into operations and grow operations here? Anything that you can give us as to what you're seeing in the health of the industry today?

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 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.

Of 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: But it didn't make much sense. So again, we go into two we finished the year very optimistic.

Speaker Change: There are no more questions at this time, please continue Mr. Gary Lindbergh.

Speaker Change: Some of what we've done in the last couple of years, and where we're going in the future.

Darren Lampert: The positives are receivables. We're collecting our receivables. We're also increasing receivables but having very little issues with getting paid in certain areas. That's always a positive for GrowGen. We see we haven't wrote off many receivables. We're pretty conservative in ways, but we're comfortable long-term with customers. We always try to help. The industry is tough. There's been very little money raised in the last couple years. President-elect Trump has said that he believes on a state-by-state, and that he will change the laws. We look back at the last four years under the Democratic regime, nothing has gotten done. We're cautiously optimistic in all different ways. We do believe it'll bring money back into the industry, whether it's state tax, whether it's rescheduling, whether it's the government staying out of it and leaving it state by state.

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: Excellent. Thank you.

Speaker Change: And we feel our shareholders and employees.

Speaker Change: There are no more questions at this time, please continue Mr. Gary Lindbergh.

Speaker Change: A happy and healthy upcoming holiday season. Thank.

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.

Gary Lindbergh: Well. Thank you for joining us today, we look forward to updating you on our progress on our year end call.

Speaker Change: All our shareholders and employees.

Speaker Change: A happy and healthy upcoming holiday season. Thank.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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.

Speaker Change #101: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

[music].

Darren Lampert: We have, if you ask me, it's been very tough sledding out there. I think United did wonderfully. We've kept our balance sheet $16 million. I believe that our stock was trading at a point where it didn't make much sense. Again, we finish the year very optimistic of what we've done in the last couple of years and where we're going in the future.

Mark Smith: Excellent. Thank you.

Darren Lampert: Well, thank you for joining us today.

Mark Smith: Excellent. Thank you.

Darren Lampert: We look forward to updating you on our progress on our year-end call. I wish all our shareholders and employees.

Operator 2: There are no more questions at this time. Please continue, Mr. Darren Lampert

Darren Lampert: a happy and healthy upcoming holiday season. Thank you for attending today, and we look forward to closing the year and then starting 2025 with strength. Thank you.

Operator 2: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Q3 2024 GrowGeneration Corp Earnings Call [part 2]

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