Q1 2026 GrowGeneration Corp Earnings Call

May 12, 2026

Speaker #1: Hello everyone, and welcome to Grow Generations' first quarter 2026 earnings conference call. My name is Matthew, and I will be your operator for today's call.

Speaker #1: 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.

Speaker #1: 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. I will now hand the call over to Phil Carlson, with KCSA Strategic Communications for Introductions and the Reading of the Safe Harbor Statement.

Speaker #1: Please go ahead, Phil.

Speaker #2: Thank you, operator, and welcome everyone to Grow Generations' first quarter 2026 earnings results conference call. With us today from Grow Generation are Darren Lampert, co-founder and chief executive officer, and Greg Sanders, chief financial officer.

Speaker #2: Company's first quarter 2026 earnings press release was issued after a close of market today. A copy of this press release is available on the Investor Relations section of the Grow Generation website at ir.growgeneration.com.

Speaker #2: 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 this private securities litigation reform act of 1995.

Speaker #2: 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 after-results to differ materially from those described in these forward-looking statements.

Speaker #2: 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.

Speaker #2: During the call, we'll use some non-GAAP financial measures as we describe business performance. The SEC filing, as well as the earnings press release, which provide reconciliations of non-GAAP financial measures, for the most directly comparable GAAP measures are all available on our website.

Speaker #2: Following prepared remarks, management will be happy to take your questions. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, please re-enter the queue, and we'll take them as time allows.

Speaker #2: Now I will hand the call over to Grow Generations' co-founder and CEO, Darren Lampert. Darren, please go ahead.

Speaker #3: Thanks, Phil. Good afternoon, everyone. Thank you for joining us to review Grow Generations' first quarter 2026 financial results. And to discuss our outlook for the rest of 2026.

Speaker #3: Over the past several years, we have transformed Grow Generation into a more focused and efficient business. Our first quarter results reflect our continued progress, highlighted by our second consecutive quarter.

Speaker #3: Of year-over-year growth. Improving profitability and continued expansion of our proprietary brand mix. While the first quarter is typically our seasonally slowest period, revenue exceeded our expectations driven by momentum and our commercial business and meaningful contribution from our storage solutions segment.

Speaker #3: As we move through 2026, we remain focused on three priorities. Expanding our commercial B2B platform, growing our proprietary brands across additional channels, and continuing to improve operating efficiency.

Speaker #3: Through the cost reduction initiatives we have implemented over the past several years. Together, these initiatives are helping improve revenue quality, support margin expansion over time, and position the business for more sustainable profitability.

Speaker #3: As I mentioned, our commercial B2B business remains the core driver of our growth strategy. Through Grow Gen Pro, we continue to expand relationships with multi-state operators, greenhouse growers, and other commercial cultivation customers across North America.

Speaker #3: Within our commercial business, we continue to see increased adoption of proprietary brands such as Charcourt and Drip Hydro. As customers standardize, around reoccurring consumable programs.

Speaker #3: At the same time, we continue to reposition our legacy retail footprint into commercial sales and service centers. Allowing our technical sales team to deepen customer relationships.

Speaker #3: And support larger commercial accounts more efficiently. Beyond our core commercial business, we are also expanding our proprietary brands into adjacent channels and new customer categories.

Speaker #3: Because these brands were developed for professional cultivators, we believe they are well positioned to expand into broader horticulture and consumer markets. Early adoption has been very positive.

Speaker #3: During the quarter, we continue expanding distribution into lawn and garden channels through online big box retail and our direct-to-consumer platform. The Harvest Company. We also continue expanding our commercial presence in Canada.

Speaker #3: And advancing additional international distribution relationships. Importantly, these initiatives leverage the same proprietary brand portfolio and supply chain infrastructure already supporting our commercial business. Allowing us to pursue growth opportunities without materially increasing complexity across the organization.

Speaker #3: We also continue to benefit from the structural cost reduction initiatives implemented over the past several years. Much of this work is now reflected in our operating structure.

Speaker #3: Positioning the business to generate improving profitability as revenues scale. We also continue to maintain a strong balance sheet ending the quarter with 41.1 million in cash, cash equivalents, and marketable securities and no debt.

Darren Lampert: Sales footprint into commercial sales and service centers, allowing our technical sales team to deepen customer relationships and support larger commercial accounts more efficiently. Beyond our core commercial business, we are also expanding our proprietary brands into adjacent channels and new customer categories. Because these brands were developed for professional cultivators, we believe they are well-positioned to expand into broader horticulture and consumer markets. Early adoption has been very positive. During the quarter, we continue expanding distribution into lawn and garden channels through online big box retail and our direct-to-consumer platform, The Harvest Company. We also continue expanding our commercial presence in Canada and advancing additional international distribution relationships. Importantly, these initiatives leverage the same proprietary brand portfolio and supply chain infrastructure already supporting our commercial business, allowing us to pursue growth opportunities without materially increasing complexity across the organization.

Speaker #3: This financial flexibility supports continued investment in our strategic priorities while maintaining a disciplined approach to capital allocation including our share repurchase. Turning to the quarter itself, first quarter revenue exceeded our expectations and marked our second consecutive quarter of year-over-year revenue growth.

Speaker #3: Despite operating with a smaller and more efficient footprint. This performance was driven primarily by continued momentum in our commercial business expanding proprietary brand penetration and strong growth in our storage solution segment.

Darren Lampert: During the quarter, we continue expanding distribution into lawn and garden channels through online big-box retail and our direct-to-consumer platform, The Harvest Company. We also continue expanding our commercial presence in Canada and advancing additional international distribution relationships. Importantly, these initiatives leverage the same proprietary brand portfolio and supply chain infrastructure already supporting our commercial business, allowing us to pursue growth opportunities without materially increasing complexity across the organization.

Speaker #3: Proprietary brand sales represented 37% of cultivation and gardening revenue during the quarter. Reflecting continued progress in shifting our sales mix towards higher value recurring consumable proprietary branded products.

Speaker #3: We also saw strong performance from our storage solution segment. Where revenue increased 35.5% year-over-year. This segment continues to benefit from increasing capital investment activity across a broader range of end markets and contributed meaningfully to both revenue growth and profitability during the quarter.

Darren Lampert: We also continue to benefit from the structural cost reduction initiatives implemented over the past several years. Much of this work is now reflected in our operating structure, positioning the business to generate improving profitability as revenue scales. We also continue to maintain a strong balance sheet, ending the quarter with $41.1 million in cash equivalents, and marketable securities, and no debt. This financial flexibility supports continued investment in our strategic priorities while maintaining a disciplined approach to capital allocation, including our share repurchase. Turning to the quarter itself, Q1 revenue exceeded our expectations and marked our second consecutive quarter of year-over-year revenue growth, despite operating with a smaller and more efficient footprint. This performance was driven primarily by continued momentum in our commercial business, expanding proprietary brand penetration, and strong growth in our storage solution segment.

Allowing us to pursue growth opportunities without materially increasing complexity across the organization.

We also continue to benefit from the structural cost reduction initiatives, implemented over the past several years.

Much of this work is now reflected in our operating structure.

Speaker #3: Overall, we believe the quarter reflects continued progress against our strategy to build a more focused commercially driven and profitable business. From a profitability standpoint, our first quarter results highlight our continued progress in improving the quality and efficiency of our business.

Positioning the business to generate improving profitability as Revenue scales.

We also continue to maintain a strong balance sheet and in the quarter with 41.1 million in cash cash equivalents and marketable securities and no debt.

Speaker #3: While gross margins were impacted by factors related to store consolidation activity, and product mix during the quarter, we believe these pressures are largely short-term in nature.

This financial flexibility supports continued investment in our strategic priorities while maintaining a disciplined approach to Capital allocation including our share repurchase.

Darren Lampert: Turning to the quarter itself, Q1 revenue exceeded our expectations and marked our second consecutive quarter of year-over-year revenue growth, despite operating with a smaller and more efficient footprint. This performance was driven primarily by continued momentum in our commercial business, expanding proprietary brand penetration, and strong growth in our storage solution segment.

According to the quarter itself.

Speaker #3: At the same time, we continue to see meaningful benefits from the cost reduction initiatives implemented over the past several years, which contributed to improved profitability during the quarter.

First quarter revenue exceeded our expectations and marked our second consecutive quarter of year-over-year revenue growth.

Despite operating with a smaller and more efficient footprint.

Speaker #3: As we move through 2026, we expect improving gross margins continued operating discipline and increasing operating leverage. Looking to the second quarter, we expect revenue in range of 42 million to 44 million along with a return to positive adjusted EBITDA.

Darren Lampert: Proprietary brand sales represented 37% of cultivation and gardening revenue during the quarter, reflecting continued progress in shifting our sales mix towards higher value recurring consumable proprietary branded products. We also saw strong performance from our storage solutions segment, where revenue increased 35.5% year over year. This segment continues to benefit from increasing capital investment activity across a broader range of end markets and contributed meaningfully to both revenue growth and profitability during the quarter. Overall, we believe the quarter reflects continued progress against our strategy to build a more focused, commercially driven, and profitable business. From a profitability standpoint, our Q1 results highlight our continued progress in improving the quality and efficiency of our business. While gross margins were impacted by factors related to store consolidation activity and product mix during the quarter, we believe these pressures are largely short term in nature.

This performance was driven primarily by continued momentum and our Commercial Business, expanding proprietary brand, penetration and strong growth in our storage solution segment.

Speaker #3: For the full year, we remain focused on expanding proprietary brand penetration towards our approximately 40% target and achieving approximately break-even adjusted EBITDA for 2026.

Proprietary brand sales represented 37% of cultivation and gardening revenue during the quarter, reflecting continued progress in shifting our sales mix.

Towards higher value.

Recurring consumable proprietary branded products.

We also saw strong performance from our storage solutions segment.

For Revenue increased 35.5%, year-over-year.

Speaker #3: Before I hand the call to Greg, I'd like to briefly comment on the regulatory environment. On April 22nd, the Acting Attorney General, signed an order moving state licensed medical cannabis to schedule three of the controlled substance act.

Darren Lampert: Overall, we believe the quarter reflects continued progress against our strategy to build a more focused, commercially driven, and profitable business. From a profitability standpoint, our Q1 results highlight our continued progress in improving the quality and efficiency of our business. While gross margins were impacted by factors related to store consolidation activity and product mix during the quarter, we believe these pressures are largely short term in nature.

Increase in capital investment activity across a broader range of end markets, and contributed meaningfully to both revenue growth and profitability during the quarter.

Speaker #3: Providing immediate 280E tax relief to qualifying operators. This is a meaningful tailwind for our customers and as their financial position strengthens their capacity to invest in the cultivation infrastructure we provide grows with it.

Overall, we believe the quarter reflex continued progress against our strategy to build a more focused, commercially driven and profitable business.

Speaker #3: While the process remains ongoing, we believe Grow Generation is well positioned to support our customers as the industry continues to mature and evolve. That concludes my remarks.

From a profitability standpoint, our first quarter results, highlighted our continued progress and improving the quality and efficiency of our business.

While gross margins were impacted by factors related to store, consolidation activity and product mixed during the quarter. We believe these pressures are largely short term in nature.

Darren Lampert: At the same time, we continue to see meaningful benefits from the cost reduction initiatives implemented over the past several years, which contributed to improved profitability during the quarter. As we move through 2026, we expect improving gross margins, continued operating discipline, and increasing operating leverage. Looking to the Q2, we expect revenue in the range of $42 million to $44 million, along with a return to positive adjusted EBITDA. For the full year, we remain focused on expanding proprietary brand penetration towards our approximately 40% target and achieving approximately break-even adjusted EBITDA for 2026. Before I hand the call to Greg, I'd like to briefly comment on our regulatory environment. On 22 April, the acting attorney general signed an order moving state-licensed medical cannabis to Schedule III of the Controlled Substances Act, providing immediate 280E tax relief to qualifying operators.

Speaker #3: Now, I'll turn the call over to our CFO, Greg Sanders.

Speaker #2: Thank you, Darren. And good afternoon, everyone. I'll begin with a review of our first quarter 2026 results and then I'll provide additional context on our outlook for the year.

At the same time, we continue to see meaningful benefits from the cost reduction initiatives implemented over the past several years, which contributed to improved profitability during the course.

Speaker #2: Overall, our first quarter performance was consistent with our expectations and reflected continued progress on our key operating priorities including proprietary brand mix expansion, cost discipline, and improving adjusted EBITDA.

As we move through 2026, we expect improving gross, margins, continued operating discipline and increasing operating Leverage.

Speaker #2: For the first quarter of 2026, Grow Generation reported net sales of 38.4 million up 7.5% compared to 35.7 million during the same period last year.

Looking to the second quarter, we expect revenue in the range of $42 million to $44 million, along with a return to positive adjusted EBITDA.

Speaker #2: This year-over-year revenue growth was led by our commercial B2B business. Net sales in our cultivation and gardening for the quarter compared to 30.9 million in the same period last year.

For the full year, we remain focused on expanding proprietary brand penetration towards our approximately 40% target and achieving approximately break-even adjusted EBITDA for 2026.

Before I hand the call to Greg, I'd like to briefly comment on a regulatory environment.

Speaker #2: Proprietary brand sales represented 37% of cultivation and gardening revenue up from 32% in the prior year. This was largely driven by our strategic initiatives to increase our sales mix of higher margin proprietary products which remains one of the primary drivers of our margin expansion and long-term profitability strategy.

Darren Lampert: This is a meaningful tailwind for our customers, and as their financial position strengthens, their capacity to invest in the cultivation infrastructure we provide grows with it. While the process remains ongoing, we believe GrowGeneration is well-positioned to support our customers as the industry continues to mature and evolve. That concludes my remarks. Now I'll turn the call over to our CFO, Greg Sanders.

Providing immediate 288 tax relief to qualifying operators.

This is a meaningful Tailwind for our customers.

And as their financial position strengthens, their capacity to invest in the cultivation infrastructure we provide grows with it.

while the process remains ongoing,

Speaker #2: In our storage solution segment, net sales were 6.5 million for the quarter up from 4.8 million in the first quarter of 2025. Growth in the segment is being driven by increasing capital investment across a broader set of end markets.

We Believe grow generation is well positioned to support our customers as the industry continues to mature and evolve.

That concludes my remarks. Now I'll turn the call over to our CFO Greg Sanders.

Gregory Sanders: Thank you, Darren. Good afternoon, everyone. I'll begin with a review of our Q1 2026 results, and then I'll provide additional context on our outlook for the year. Overall, our Q1 performance was consistent with our expectations and reflected continued progress on our key operating priorities, including proprietary brand mix expansion, cost discipline, and improving adjusted EBITDA. For the Q1 2026, GrowGeneration reported net sales of $38.4 million, up 7.5% compared to $35.7 million during the same period last year. This year-over-year revenue growth was led by our commercial B2B business. Net sales in our cultivation and gardening segment were $31.9 million for the quarter, compared to $30.9 million in the same period last year.

Speaker #2: As customers continue to invest in infrastructure, automation, and facility expansion, this trend is supporting both volume growth and a more diversified demand profile. Gross profit was 9.7 million for the first quarter of 2026 consistent with the same period last year.

Thank you, Darren and good afternoon everyone. I'll begin with the review of our first quarter 2026 results and then I'll provide additional context on our outlook for the year.

Overall our first quarter performance was consistent with our expectations and reflected continued progress. On our key operating priorities including proprietary brand mix expansion, cost discipline and improving adjusted ibida.

Speaker #2: In cultivation and gardening, gross profit declined year-over-year primarily due to inventory-related charges from four store closures and a higher mix of lower-margin durable products.

Speaker #2: Excluding these items, margins would have been generally in line with the prior year. This was partially offset by strengthened storage solutions where higher volume and a 200 basis point improvement in gross margin to 39.6 drove a 42.7% increase in gross profit dollars.

For the first quarter of 2026 grow generation reported net. Sales of 38.4 million up, 7.5% compared to 35.7 million during the same period last year. This year-over-year Revenue growth was led by our commercial B2B business.

Gregory Sanders: Proprietary brand sales represented 37% of cultivation and gardening revenue, up from 32% in the prior year. This was largely driven by our strategic initiatives to increase our sales mix of higher-margin proprietary products, which remains one of the primary drivers of our margin expansion and long-term profitability strategy. In our Storage Solution Segment, net sales were $6.5 million for the quarter, up from $4.8 million in Q1 2025. Growth in the segment is being driven by increasing capital investment across a broader set of end markets as customers continue to invest in infrastructure, automation, and facility expansion. This trend is supporting both volume growth and a more diversified demand profile. Gross profit was $9.7 million for Q1 2026, consistent with the same period last year.

Net sales in our cultivation and gardening segment where 3 1. 9 0 0.

Speaker #2: Total company gross margin was 25.4% for the quarter compared to 27.2% in the prior year period. Now, turning to expenses, in the first quarter of 2026, store and other operating expenses declined by approximately 27.2% to 6.4 million compared to 8.8 million in the first quarter of 2025.

Proprietary, brand sales represented, 37% of cultivation and gardening Revenue up from 32% in the prior year.

This was largely driven by our strategic initiatives to increase our sales mix of higher margin proprietary products which remains 1 of the primary drivers of our margin expansion and long-term profitability strategy.

Speaker #2: Reflecting the benefits of our cost reduction initiatives, selling general and administrative expenses were 6.9 million at 2.6% improvement compared to 7.1 million last year.

In our storage solution. Segment, net sales were 6.5 million for the quarter up from 4.8 million in the first quarter of 2025.

Growth in the segment is being driven by increasing capital investment across a broader set of end markets.

Speaker #2: Total operating expenses decreased by 4.6 million or 23.4% to 15 million compared to 19.6 million in the comparable 2025 period. Depreciation and amortization totaled 1.6 million down 2 million or 55.1% compared to 3.6 million in the same period last year.

As customers continue to invest in infrastructure, automation, and facility expansion.

This trend is supporting both volume growth and a more Diversified demand profile.

Gross profit was $9.7 million for the first quarter of 2026.

Gregory Sanders: In cultivation and gardening, gross profit declined year-over-year, primarily due to inventory-related charges from four store closures and a higher mix of lower-margin durable products. Excluding these items, margins would have been generally in line with the prior year. This was partially offset by strength in storage solutions, where higher volume and a 200 basis point improvement in gross margin to 39.6 drove a 42.7% increase in gross profit dollars. Total company gross margin was 25.4% for the quarter, compared to 27.2% in the prior year period. Now turning to expenses. In the Q1 of 2026, store and other operating expenses declined by approximately 27.2% to $6.4 million, compared to $8.8 million in the Q1 of 2025, reflecting the benefits of our cost reduction initiatives.

Consistent with the same period last year.

Speaker #2: The decrease primarily reflects asset retirements related to cost reduction initiatives and certain intangible assets reaching the end of their useful lives. Gap net loss decreased to 4.9 million or -0.8 cents per share of 4.5 million dollar improvement compared to a net loss of 9.4 million or -0.16 cents per share in the prior year period.

In cultivation and gardening gross profit declined year-over-year. Primarily due to inventory related charges from 4 store, closures and a higher mix of lower margin durable products.

Excluding these items, margins would have been generally in line with the prior year.

This was partially offset by strength and Storage Solutions.

Were higher volume and a 200 basis. Point Improvement in gross, margin to 39.6. Drove a 42.7% increase in gross profit dollars.

Speaker #2: The improvement was primarily driven by higher revenues reduced operating expenses lower depreciation and amortization partially offset by lower gross margin percent. Non-gap adjusted EBITDA as defined in our press release was a loss of 1.6 million at 2.4 million year-over-year improvement compared to a loss of 4 million in the prior year.

Total company gross margin was 25.4% for the quarter compared to 27.2% in the prior year period.

now, turning to expenses in the first quarter of 2026,

Store and other operating expenses declined by approximately 27.2% to 6.4 million compared to 8.8 million in the first quarter of 2025.

Speaker #2: Primarily reflecting the impact of our cost reduction initiatives and improved operating leverage. Now, turning to the balance sheet, we ended the quarter with 41.1 million of cash, cash equivalents, and marketable securities and no debt.

Reflecting the benefits of our cost reduction initiatives.

Gregory Sanders: Selling, general, and administrative expenses were $6.9 million, a $2.6 million improvement compared to $7.1 million last year. Total operating expenses decreased by $4.6 million or 23.4% to $15 million, compared to $19.6 million in the comparable 2025 period. Depreciation and amortization totaled $1.6 million, down $2 million or 55.1% compared to $3.6 million in the same period last year. The decrease primarily reflects asset retirements related to cost reduction initiatives and certain intangible assets reaching the end of their useful lives. GAAP net loss decreased to $4.9 million or -$0.08 per share, a $4.5 million improvement compared to a net loss of $9.4 million or -$0.16 per share in the prior year period.

Selling General and administrative expenses. Were 6.9 million a 2.6% Improvement compared to 7.1 Million last year.

Speaker #2: This reflects our continued focus on liquidity working capital discipline and inventory quality. Our balance sheet strength provides us with the financial flexibility to execute our strategic priorities while maintaining a disciplined approach to capital allocation.

Total operating expenses decreased by $4.6 million, or 23.4%, to $15 million compared to $19.6 million in the comparable 2025 period.

Speaker #2: During the first quarter, our board of directors authorized a share repurchase program of up to 10 million of the company's outstanding common stock. Reflecting our view that the current share price does not reflect the long-term value of the business.

Depreciation and amortization totaled $1.6 million, down $2 million or 55.1% compared to $3.6 million in the same period last year.

The decrease primarily reflects asset retirements related to cost reduction initiatives and certain intangible assets, reaching the end of their useful lives.

Speaker #2: We intend to execute the program opportunistically subject to market conditions capital allocation priorities and the applicable securities laws. Now, turning to our outlook, we are reaffirming our full year 2026 guidance.

4 million or -6 cents per share in the prior year period.

Gregory Sanders: The improvement was primarily driven by higher revenues, reduced operating expenses, lower depreciation and amortization, partially offset by lower gross margin %. Non-GAAP adjusted EBITDA, as defined in our press release, was a loss of $1.6 million, a $2.4 million year-over-year improvement compared to a loss of $4 million in the prior year, primarily reflecting the impact of our cost reduction initiatives and improved operating leverage. Now turning to the balance sheet. We ended the quarter with $41.1 million of cash equivalents, and marketable securities and no debt. This reflects our continued focus on liquidity, working capital discipline, and inventory quality. Our balance sheet strength provides us with the financial flexibility to execute our strategic priorities while maintaining a disciplined approach to capital allocation.

The Improvement was primarily driven by higher revenues.

Speaker #2: We continue to expect net revenue in the range of 162 to 168 million and approximately break-even adjusted EBITDA for the full year. Our outlook reflects a continued focus on revenue quality proprietary brand mix and disciplined cost management.

Reduced operating, expenses lower depreciation, and amortization.

Partially offset by lower gross margin percent.

Speaker #2: For the second quarter, we expect net revenue in the range of 42 million to 44 million with a return to positive adjusted EBITDA. To summarize, our year-over-year revenue growth in the first quarter was driven by continued strength in our commercial business and a meaningful contribution from our storage solution segment.

Non-gaap adjusted. Ibra as defined in our press release was a loss of 1.6 million. A 2.4 million year-over-year Improvement compared to a loss of 4 million in the prior year.

Primarily reflecting the impact of our cost reduction initiatives and improved operating Leverage

Now turning to the balance sheet, we ended the quarter with 41.1 million of cash, cash, equivalents and marketable, securities, and no debt.

Speaker #2: We also delivered improved profitability reflecting the impact of our cost reduction initiatives and a more efficient operating structure. We ended the quarter with a strong liquidity position and no debt providing flexibility as we continue to execute our strategy.

This reflects our continued focus on liquidity, working capital discipline and inventory quality.

Our balance sheet strength provides us with the financial flexibility to execute. Our strategic priorities while maintaining a disciplined approach to Capital allocation.

Gregory Sanders: During Q1, our board of directors authorized a share repurchase program of up to $10 million of the company's outstanding common stock, reflecting our view that the current share price does not reflect the long-term value of the business. We intend to execute the program opportunistically subject to market conditions, capital allocation priorities, and the applicable securities laws. Now turning to our outlook. We are reaffirming our full year 2026 guidance. We continue to expect net revenue in the range of $162 to 168 million and approximately break-even adjusted EBITDA for the full year. Our outlook reflects a continued focus on revenue quality, proprietary brand mix, and disciplined cost management. For Q2, we expect net revenue in the range of $42 million to 44 million with a return to +adjusted EBITDA.

Speaker #2: Looking ahead, we remain focused on driving revenue quality expanding proprietary brand penetration toward our approximately 40% year-end target and delivering break-even adjusted EBITDA for the full year.

during the first quarter, our board of directors authorized a share of purchase program of up to 10 million of the company's outstanding, common stock

Reflecting our view that the current share price does not reflect the long-term value of the business.

Speaker #2: With that, I'll turn the call back to Darren for closing remarks.

Speaker #1: Thanks, Greg. And thank you again to everyone for joining us today. In closing, we believe the first quarter reflected continued progress against the strategic and operational priorities we have been focused on over the past several years.

We intend to execute the program opportunistically subject to market conditions, Capital, allocation, priorities, and the applicable Securities laws.

Now, turning to our Outlook.

We are reaffirming our full year 2026 guidance.

Speaker #1: We delivered another quarter of year-over-year revenue growth continued expanding proprietary brand penetration improved profitability and maintained a strong balance sheet. As we move through 2026, we remain focused on growing our commercial platform expanding higher margin proprietary brand sales driving operating leverage and executing with discipline across the organization.

We continue to expect net revenue in the range of 162 to 168 million in approximately Break, Even adjusted e butt out for the full year.

Our Outlook reflects a continued focus on Revenue quality.

Proprietary brand, mix.

And disciplines cost management.

For the second quarter, we expect net revenue in the range of $42 million to $44 million, with a return to positive adjusted EBITDA.

Gregory Sanders: To summarize, our year-over-year revenue growth in Q1 was driven by continued strength in our commercial business and a meaningful contribution from our storage solution segment. We also delivered improved profitability, reflecting the impact of our cost reduction initiatives and a more efficient operating structure. We ended the quarter with a strong liquidity position and no debt, providing flexibility as we continue to execute our strategy. Looking ahead, we remain focused on driving revenue quality, expanding proprietary brand penetration toward our approximately 40% year-end target, and delivering break-even adjusted EBITDA for the full year. With that, I'll turn the call back to Darren for closing remarks.

To summarize.

Speaker #1: We believe these initiatives position the company well to continue improving profitability and creating long-term shareholder value. We appreciate your continued support and look forward to updating you on our progress throughout the year.

Our year-over-year Revenue growth. In the first quarter, was driven by continued strength in our Commercial Business and a meaningful contribution from our storage solution segment.

We also delivered improved profitability.

Speaker #1: That concludes our prepared remarks. Operator, please open the line for questions.

Reflecting the impact of our cost reduction initiatives in a more efficient operating structure.

Speaker #3: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone.

We ended the quarter with a strong liquidity position and no debt, providing flexibility as we continue to execute our strategy.

Looking ahead, we remain focused on driving revenue quality.

Speaker #3: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two.

Speaker #3: If you are using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Aaron Gray of Alliance Global Partners.

Expanding proprietary brand, penetration toward our approximately 40% year-end target, and delivering break-even adjusted EBITDA for the full year.

Darren Lampert: Thanks, Greg. Thank you again to everyone for joining us today. In closing, we believe the Q1 reflected continued progress against the strategic and operational priorities we have been focused on over the past several years. We delivered another quarter of year-over-year revenue growth, continued expanding proprietary brand penetration, improved profitability, and maintained a strong balance sheet. As we move through 2026, we remain focused on growing our commercial platform, expanding higher margin proprietary brand sales, driving operating leverage, and executing with discipline across the organization. We believe these initiatives position the company well to continue improving profitability and creating long-term shareholder value. We appreciate your continued support and look forward to updating you on our progress throughout the year. That concludes our prepared remarks. Operator, please open the line for questions.

With that, I'll turn the call back to Darren for closing remarks.

Thanks, Greg. And thank you again to everyone for joining us today.

Speaker #3: Please go ahead, your line is open.

Speaker #4: Hi, good evening. And thank you very much for the questions. First question for me, just on the rescheduling news, I want to talk about maybe some of the more near-term impacts and through the mindset of maybe durables and some of the delays and refreshes just given some of the tough cash flow issues and balance sheet issues some operators have had.

In closing, we believe the first quarter, reflected continued progress against the Strategic and operational priorities. We have been focused on over the past several years.

We delivered another quarter of year-over-year revenue growth.

Continued expanding proprietary brand penetration improved profitability and maintained a strong balance sheet.

Speaker #4: It might be a bit too early, but could you talk about some potential impacts of now getting clarity on the 280E on the go-forward and potentially getting some forgiveness on the legacy taxes owed and what impact that could have to open up to refreshes and your durables business?

As we move through 20126.

We remain focused on growing, our commercial platform.

Expanding higher margin, proprietary brand sales.

Driving operating leverage and executing with discipline across the organization.

Speaker #4: Thank you.

Speaker #1: Yeah. And we've been talking about this for a while. We certainly think it's a meaningful tailwind for our customers. As their financial position strengthens, their capacity to reinvest money in the infrastructure.

We believe these initiatives position the company well to continue improving profitability and creating long-term shareholder value.

Speaker #1: We believe we'll provide RoGen with the probably a long-term durable mix going forward into the future. We're starting to see it now. We have never been we haven't been this active since 2021 bidding out lighting, dehumidification, and infrastructure for facilities.

We appreciate your continued support and look forward to updating you on our progress throughout the year.

That concludes our prepared remarks operator, please open the line for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. One moment please for your first question. Your first question comes from Aaron Grey of Alliance Global Partners. Please go ahead. Your line is open.

Thank you, ladies and gentlemen, we will now begin the question and answer session.

Should you have a question, please press star, followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised.

Speaker #1: So we're pretty excited about it. And as we focus on the B2B side of our business, we're in a beautiful spot right now. And we are able to finance.

Could you be for the client for the polling process? Please press star. Followed by the number 2. If you are using a speaker phone, please, leave the handset, before pressing any keys.

Speaker #1: So we think you will see continued movement in the durable side of the business throughout the year. There's some important certainly important conversations coming up in June on the recreational side of it.

And their first question comes from Aaron Gray of Alliance Global Partners. Please go ahead, your line is open.

Aaron Grey: Hi, good evening, and, thank you very much for the questions. First question from me, just on the rescheduling news. Wanna talk about maybe some of the more near-term impacts and through the mindset of maybe durables and some of the delays and refreshes given, you know, some of the tough cash flow issues and balance sheet issues some operators have had. It might be a bit too early, but could you talk about some potential impacts of now getting clarity on the 280E on the go forward and potentially getting some forgiveness on the legacy taxes owed and what impact that could have to open up to refreshes and your durables business? Thank you.

Speaker #1: But the money that's coming back to these balance sheets will be spent a lot of facilities right now in these refurbishing. So we're pretty excited.

Hi, good evening, and uh, thank you very much for the questions.

First question for me, just on the rescheduling news.

Speaker #1: And we saw the mix starting even in the first quarter. But right now, our pipeline hasn't been this strong since '21. And we certainly are looking for a long-term boom on the durable side of it, which also comes into play on the consumable side of it also.

Speaker #4: Okay. Great. That's helpful color, Darren. Second question for me, just as we look at Q2 and for the remainder of the year, is as we think about some sequencing of the gross margin, you talked about Q2 being positive EBITDA.

Want to talk about maybe some of the, the more near-term impacts and through the mindset of maybe durables. And some of the delays and refreshes given, you know, some of the tough uh cash flow issues and balance sheet issues. Some operators have had it might be a bit too early, but could you talk about some potential impacts of now, getting Clarity on the 280e, on the go forward and potentially getting some forgiveness on, um, the Legacy taxes owed. And what impact that could have to open up to refreshes and your durables business. Thank you.

Darren Lampert: Yeah. We've been talking about this for a while. You know, we certainly think it's a meaningful tailwind for our customers, you know, as their financial position strengthen and their capacity to, you know, reinvest money in the infrastructure. We believe we'll, you know, provide GrowGen with a probably a long-term, you know, durable mix going forward into the future. We're starting to see it now. We haven't been this active since 2021 on bidding out lighting, dehumidification and infrastructure for facilities. We're pretty excited about it. You know, as we focus on the B2B side of our business, we're in a beautiful spot right now, you know, we are able to finance. You know, we think you will see, you know, continued movement, the durable side of the business throughout the year.

Speaker #4: How should we think about the role of gross margin and potential step change there? And then how we think it sequencing through the year to get to the full year guide.

Yeah, and we've been talking about this for a while. You know, we certainly think it's a meaningful tailwind for our customers.

You know, is there a financial position strengthened?

Speaker #4: Thanks.

Speaker #1: Yeah, Aaron. Thanks for the question. So we were happy with the first quarter results coming in at 38 million against our full year goal of 162 to 168 million in sales.

Speaker #1: As we look at Q2, Q3, we see the business ramping Q2, 42 to 44 million in sales. And margin profile back into that 27 to 29 percent range.

Speaker #1: I think what you saw in the first quarter was we closed four stores and it had a point-and-a-half impact on margin. So slightly lower than expectation.

In their capacity to, you know, reinvest money the infrastructure. Um, we believe will, you know, provide growgen with the probably a long-term, you know, durable. Um, mix going forward into the future. We're starting to see it now. Uh, we have never been we've ever been this active since 2021 on bidding out, um, lighting um, dehumidification and infrastructure for facilities. So we're pretty excited about it.

Speaker #1: But I think the good news is as we look at the remainder of the year, we have less store closures, scheduled, as of this point in time.

Darren Lampert: There's some important, you know, certainly important conversations coming up in June on the recreational side of it. The money that's coming back to these balance sheets will be spent. A lot of facilities right now need refurbishing. We're pretty excited, and we saw the mix starting even in Q1. Right now, you know, our pipeline hasn't been this strong from since 2021 and we certainly are looking for a long-term boom on the durable side of it, which also comes into play on the consumable side of it also.

Speaker #1: So we expect less impact in future reporting periods from the closure activity. And we think with 100 to 25 to 130 million in revenue remaining in our full year guidance, that we'll be able to position the business back into that 27 to 29 percent range for the full year.

And, you know, as we focus on the B2B side of our business. Um, we're in a beautiful spot right now, you know, and we are able to finance. So, you know, we think you will see, you know, continued movement, the durable side of the business throughout the year. Um, there's some important, you know, certainly important.

Speaker #5: Yeah, Aaron. The other side of that also, in the first quarter, as we transition this company into a business-to-business as opposed to business-consumer, our private label brands are growing certainly quicker than we have expected.

Conversations coming up in June, on the recreational side of it. Um, but the money that's coming back to these balance, sheets, will be spent a lot of facilities right now and these refurbishing, so we're pretty excited and we saw the mix starting even in the first quarter, but right now, you know, our pipeline hasn't been this strong from since 21. And uh we certainly are looking for a long-term boom on a durable, side of it. Which also comes into play on the consumable side of it. Also,

Aaron Grey: Okay, great. That's helpful color, Darren. Second question for me, just as we look at Q2 and for the remainder of the year, is as we think about some sequencing of the gross margin, you talked about Q2 being positive EBITDA. You know, how should we think about the role of gross margin potential step change there, and then how we think it sequencing through the year to get to the full year guide? Thanks.

Speaker #5: And we believe you'll see those in the 40s before the fourth quarter of this year. We have had some inventory issues with some products that have been sitting around that have become obsolete and slow-moving.

Okay, great. That's helpful. Color Darren second question for me just

Speaker #5: Not our brand, but other brands. So we have gotten a little more aggressive in the first quarter. Marking some products and selling some products at discounts.

Speaker #5: And you'll see that you'll see that moving positively through the end of the through the rest of this year. So you will see margins start ticking back up.

As we look at 2 q. And and for the remainder of the Year is, as we think about some sequencing of the gross margin. You talked about 2, Q being positive EPA, and how should we think about the role of gross margin and potential, step change there, and then how we think it um sequencing through the year to get to the full year guide. Thanks.

Gregory Sanders: Yeah, Aaron Grey, thanks for the question. We were happy with the Q1 results coming in at $38 million against our full year goal of $162 to 168 million in sales. As we look at Q2, Q3, you know, we see the business ramping, you know, Q2 $42 to 44 million in sales and margin profile back into that 27% to 29% range. I think what you saw in the Q1 was we closed 4 stores and it had a, you know, 1.5 impact on margin, so slightly lower than expectation. I think the good news is as we look at the remainder of the year, we have less store closures scheduled as of this point in time. We expect less impact in future reporting periods from the closure activity.

Speaker #4: Okay. Great, Darren. Appreciate the detail. I'll go and jump back in the queue.

Yeah, and thanks for the question. So we were happy with the first quarter results coming in at $38 million against our full-year goal of $162 to $168 million in sales.

Speaker #3: Thank you. And your next question comes from Brian Nagel of Oppenheimer. Please go ahead, your line is open.

Speaker #6: Hey, guys. Good afternoon.

Speaker #1: Nice progress here. Congrats.

Speaker #5: Thank you.

Speaker #1: There are a few questions, Darren. I guess I want to go back to the question we just asked. And look, I recognize there's a lot of moving parts happening.

Speaker #1: Both at RoGen and then in the sector. But as you think about you mentioned in response to the prior question that you've seen this most build-out activity, probably not using the right words, most build-out activity since '21.

Gregory Sanders: We think with, you know, $125 to 130 million in revenue remaining in our full year guidance, that we'll be able to position the business back into that 27% to 29% range for the full year.

Speaker #1: Do you think is that a function of I guess the rescheduling? Or is there another factor at play? Or is it some combination of factors?

Um as we look at Q2 Q3, you know, we see the business ramping, you know Q2 42 to 44 million in sales and margin profile back into that 27 to 29% range. I think what you saw in the first quarter was we closed for stores and it had a, you know, point and a half impact on margin. So slightly lower than expectation but I think the good news is as we look at the remainder of the year, um, we have less store closures scheduled as of this point in time so we expect less impact in future reporting periods from the closure activity. And we think with you know 100 to 125 to 130 million in Revenue remaining in our full year guidance that we'll be able to position the business back into that, 27 to 29% range for the full year.

Darren Lampert: Yeah. On the other side of that also, in Q1, you know, as we transition this company into a business-to-business as opposed to business consumer, our private label brands are growing, you know, certainly quicker than we had expected, and we believe you'll see those in the 40s, you know, before Q4 of this year. You know, we have had some inventory issues with some products that have been sitting around that have become obsolete and slow-moving, not our brands, but other brands. We have gotten a little more aggressive in Q1, marking some products and selling some products at discounts. You know, you'll see that move, you know, you'll see that, you know, moving positively through the rest of this year. You will see margins start ticking back up.

Speaker #5: I think there's a couple of different functions, Brian. To start with, a lot of the facilities do need to be refurbished. Like RoGen, a lot of our customers have been extremely concerned about their balance sheets as we have.

Yeah, on the other side of that, also in the first quarter.

Speaker #5: And they have pushed they have pushed refurbishment and building out another year or a year longer than they could have. So I think everyone's been managing balance sheets.

Speaker #5: But on the other side of it, we do believe that with rescheduling, the amount of money coming back into this industry anywhere between a billion and two back onto balance sheets, I mean, people are looking for more efficient ways to grow and more efficient products out there today.

You know, as we transition this company into a business-to-business, as opposed to business-to-consumer, and our private label brands are growing, you know, certainly quicker than we have expected, and we believe you'll see those in the 40s, you know, before the fourth quarter of this year. You know, we have had some inventory issues with some products that have been sitting around that have become obsolete and slow moving—um, not our brands, but other brands. So, so we have gotten a little more aggressive.

Speaker #5: Most of our customers are growing much more efficiently than they used to, getting many more getting more pounds per life than they used to, more ounces per life.

Invested in the first quarter um marking some product and selling some products at discounts. And you know, you'll see that moving, you know, you'll see that you know, moving positively through the end of the through the rest of this year. So you will see margins start taking back up.

Aaron Grey: Okay, great, Darren. Appreciate the detail. I'll go and jump back in the queue.

Operator: Thank you. Your next question comes from Brian Nagel of Oppenheimer. Please go ahead.

Speaker #5: So it's this trade-off that you're starting to see. But on the other side on the other side of it also, RoGen is well-positioned from a balance sheet side to lend money to our customers and to help them refurbish facilities.

Brian Nagel: Hey, guys. Good afternoon.

Thank you. And your next question comes from Brian Nagel of Oppenheimer. Please go ahead, your line is open.

Gregory Sanders: Thanks, Brian.

Brian Nagel: Congrats.

Hey guys, good afternoon.

Nice progress here. Congrats.

Darren Lampert: Thank you.

Brian Nagel: There are a few questions, Darren. I guess I wanna go back to the question that was just asked. Look, I recognize that there's a lot of moving parts happening, you know, both at GrowGen and in the sector. As you think about, you know, you mentioned in response to the, you know, the prior question that, you know, you've seen this, you know, the most build out activity, and I probably not using the right words, most build out activity since 2021. Do you think is that a function of, you know, I guess this, you know, the rescheduling? Or is there another factor at play or some combination of factors?

Speaker #5: So I think it's coming from everywhere. But you're also starting to see, as you probably heard from the MSOs, that supply demand is starting to come into balance with rescheduling on the medical side.

look, I recognize and there's a lot of moving Parts happening, you know, both at broen Etc, but

Speaker #5: There is talk about some certain of our companies, the MSOs, exporting cannabis over into the European markets. Which will bring again, less supply offline here.

If you think about it, you know, you mentioned in response to the prior question that, you know, you've seen this, you know, the most buildout activity—and I’m probably not using the right words—the most buildout activities, so 21.

Speaker #5: So hopefully, prices stabilize to start going back up. So we haven't seen the industry in this shape since 2000 and '21. And I'm a firm believer right now.

Darren Lampert: I think there's a couple different functions, Brian Nagel. You know, to start with, a lot of the facilities do need to be refurbished. Like GrowGen, a lot of our customers have been extremely concerned about their balance sheets as we have. They have pushed, you know, they have pushed refurbishment and building, you know, out another year or a year longer than they could've. I think, you know, everyone's been managing balance sheets. From the other side of it, you know, we do believe that, you know, with rescheduling, the amount of money coming back into this industry, you know, anywhere between $1 billion and $2 billion back onto balance sheets. I mean, people are looking for, you know, more efficient ways to grow and there are more efficient products out there today.

If you think is that a function of, you know, I guess this this you know, the leg the um the rescheduling or is there another factor of players or some combination of practice?

Speaker #5: Most of the companies that are in business that are doing well, that have retained balance sheets, they're going to be around for a long time to come.

Speaker #5: And you're going to see a tremendous sea change in this industry. And I do believe from our side of it, from the equipment side of it, RoGen is going to lead it.

Speaker #5: We have changed this business tremendously. We have hired facility advisors, technical advisors. We have groups of RoGen employees going into facilities on a daily basis, helping with grows, recommending different products to our customers.

Speaker #5: So the business is just tremendously different. We're down to 19 facilities right now from 65. And what you saw in the first quarter was year-over-year growth was 12 left facilities.

Darren Lampert: Most of our customers, you know, are growing much more efficiently than they used to, getting many more, you know, getting more pounds, you know, per light than they used to, more ounces per light. You know, it's this trade-off that you're starting to see. On the other side of it also, you know, GrowGen is well-positioned from a balance sheet side, you know, to lend money to our customers and to help them, you know, refurbish facilities. I think it's coming from everywhere. What you're also starting to see, as you probably heard from the MSOs, that supply-demand is starting to come into balance with rescheduling on the medical side.

Speaker #5: And I think we've been pretty transparent that usually when we close facilities, we've been losing up to 50% of walk-in business. So you're still seeing revenue growth on that side.

Speaker #5: With many less stores. So the revenue growth that you're seeing in the first quarter, albeit small, was really greater than it looks and we believe you'll see this growth throughout the year.

I think this is a couple of different functions frying, you know, to start with a lot of the facilities do need to be refurbished. Um like growen a lot of our, a lot of our customers have been extremely concerned about their balance. She says we have and they have pushed, you know, they have pushed refurbishment and and building you know, out another year or year longer than they could have. Um, so I think, you know, everyone's been managing balance sheets, but on the other side of it, you know, we do believe that, you know, with rescheduling the amount of money coming back into this industry, you know, anywhere between a billion and 2 back on to balance sheets. I mean, people are looking for, you know, more efficient ways to grow and they're more efficient products out there today. Um, most of our customers, you know, are growing much more efficiently than they used to getting many more, you know, getting more pounds, you know, perlite than they used to more ounces to provide. So you know it's this trade-off that you're starting to see but on the other side, on the other side of it also you know growin is well.

Speaker #5: And one of the exciting parts, even you're seeing on the expense side, the expenses coming down. But you're seeing revenue starting to go up.

Speaker #5: And we think we're just we think this is a reset like anything else, Brian. We spent from 2021 to 2026 resetting RoGen. And we believe right now we're in that position right now where you'll see you'll see quarters-over growth and you'll see RoGen returning to where it was back in back in the early 2020s.

Darren Lampert: There is talk about, you know, some certain of our companies, the MSOs, exporting cannabis over into the European markets, which will bring, you know, less supply offline here. Hopefully prices stabilize and start going back up. You know, we haven't seen the industry in this shape since 2021. I'm a firm believer right now, you know, most of the companies that are in business that are doing well, that have retained balance sheets, you know, they're gonna be around for a long time to come. You're gonna see a tremendous sea change in this industry. I do believe from our side of it, from the equipment side of it, GrowGen is gonna lead it. You know, we have changed this business tremendously. We have hired facility advisors, technical advisors.

Speaker #1: That's very helpful, Darren. And so my second question, and you just touched on it there. Again, if I make sure I'm looking at the numbers correctly.

Speaker #1: But the revenue this is your second quarter of revenue, total company. You're on your revenue growth. And it looks I mean, if I'm reading the numbers right, the revenue growth accelerated rather significantly.

Speaker #1: The rate of growth accelerated rather significantly Q4 to Q1. That's correct. So what's that? I mean, how should we think about what happened basically between those two quarters?

Position, from a balance sheet size, you know, it's a lend money to our customers and, and, and to help them, you know, refurbish facilities. So, I think it's coming from everywhere which are also starting to see as you probably heard from the msos that Supply demand is starting to come into balance. Um, with with rescheduling on the medical side, there is talk about, you know, some certain of our companies emsos exporting cannabis over into the European markets which will bring you know again less Supply offline here. Uh so hopefully prices stay the last to start going back up. So you know, we haven't seen the industry in this shape since 2021 and I'm a firm believer right now. You know, most of the companies that are in business that are doing well that have retained balance sheets. You know, they're going to be around for a long time to come, you're going to see a tremendous sea change in this industry. Um and I do believe from our side of it, from the equipment side of it um growth and is going to lead. You know, we have changed this business tremendously.

Darren Lampert: You know, we have groups of, of GrowGen employees going into facilities on a daily basis, helping with grows, recommending different products to our customers. The business is just tremendously different. You know, we're down to 19 facilities right now from 65. What you saw in Q1 was year-over-year growth with 12 less facilities. I think we've been pretty transparent that usually when we close facilities, we've been losing up to 50% of walk-in business. You're still seeing revenue growth on that side, you know, with many less stores. The revenue growth that you're seeing in Q1, albeit small, was really greater than it looks. We believe you'll see this growth throughout the year.

Speaker #5: I think there's twofold. One is year-over-year revenue growth that you saw two quarters in a row, Brian. We usually see revenue growth from first fourth quarter to first quarter.

Speaker #5: And then you'll see tremendous revenue growth from second and third quarters, which are usually our strongest quarters. But we're looking year-over-year growth. And when you look at last year first quarter, we had 31 stores.

We have hired facility, advisors, technical advisors. You know, we have groups of, of, of growen employees going into facilities on a daily basis, helping with growth, um, recommending different products to our customers. Um, so the the business is just tremendously different, you know, we're down to 19 facilities right now, from 65 and which is sort of in the first quarter was year-over-year. Growth was 12 left facilities and I think we've been pretty transparent that. Usually, when we close, you know, we close

Speaker #5: And we're down to 19 stores, 19 locations right now. And you're still seeing revenue growth with 12 less locations.

Speaker #1: That's helpful. I appreciate it. Thank you.

Speaker #5: Thank you, Brian.

Darren Lampert: One of the exciting parts even, you know, you're seeing, you know, on the expense side and the expenses coming down, you're seeing revenues starting to go up. We think we're just, you know, we think this is a reset like anything else, Brian. You know, we spent from 2021 to 2026 resetting GrowGen. We believe right now, we're in that position right now where you'll see, you know, you'll see quarters over growth, and you'll see GrowGen returning to where it was back in, you know, back in the early 2020s.

Speaker #2: Thank you. And your next question comes from Mark Smith of Lakesfree. Please go ahead. Your line is open.

Speaker #6: Hi, guys. I wanted to dig in just a little bit more on some of the inventory in the closed locations and sales. I realize this puts some pressure on gross profit margin.

Speaker #6: As you're clearing some of this out. But I'm curious if you can quantify it all, maybe how much of the sales kind of came from these closed locations inventory.

Facilities. We've been losing up to 50% of walk-in business so you're still seeing Revenue growth on that side, you know, with many Less stores. So the revenue growth that you're seeing in the first quarter albeit small was really greater than it looks. Um and we believe, you know, you'll see this growth throughout the year 1 of the exciting Parts. Even you know, you're seeing you know the expense side, the expenses coming down but you're you're seeing Revenue starting to go up and um we think we're just you know we think this is a reset like anything else mine and we spent from 2021 to 2026. Resetting growth in we believe right now we're in that position right now where you'll see, you know, you'll see quarters over growth and you'll see grow generally.

Speaker #6: And if there's still some inventory out there to work through in Q2.

Returning to where it was back in, you know, back in the '20s—that early 2020s.

Brian Nagel: It's very helpful, Darren. My second question, and you just touched on it there. Again, if I'm making sure I'm looking at the numbers correctly. You know, the revenue, this is your second consecutive quarter of revenue. You told the company you're on your revenue growth. It looks, I mean, if I'm reading the numbers right, the revenue growth accelerated rather significantly. The rate of growth accelerated rather significantly, you know, Q4 to Q1. That's correct. What's, what's that? I mean, how should we think about, you know, what happened basically between those two quarters?

Speaker #1: Yeah, Mark. So in the first quarter, we closed four locations. And with that, we include some level of detail in the adjusted EBIT add-back schedule.

Speaker #1: We estimate that the actual impact on gross margin was about a point and a half to kind of push us back into guidance range.

It's very helpful there and that it's my second question and you just touched on there again. If I make sure I'm looking at the numbers correctly but you know the revenue, this is your second consecutive quarter of Revenue. You told the company you're on your Revenue growth and it looks, I mean, if I'm reading the numbers right, the, the revenue growth accelerate rather significantly like the rate of for accelerate relationship differently, your Q4 and q1. That's correct. So what

Speaker #1: If we hadn't closed those locations from activity that's really twofold. One is what ends up getting discarded and two is what's liquidated throughout the course of the pre-closing activity.

What's a what's that? I mean how should how should we think about, you know, what happened basically between those 2 borders.

Darren Lampert: I think there is twofold. One is year-over-year revenue growth that you saw 2 quarters in a row, Brian. We usually see revenue growth from first Q4 to Q1. Then you'll see tremendous revenue growth from Q2 and Q3, which are usually our strongest quarters. We're looking year-over-year growth. When you look at last year Q1, you know, we had 31 stores. We're down to 19 stores, you know, 19 locations right now, and you're still seeing revenue growth, you know, with 12 less locations.

Speaker #1: And then there's incremental freight and certain things potentially as well. And in terms of moving the inventory from those activities, and I think when you look at the business and maybe the outlook for the rest of 2026, I don't think you'll see as many closures as we had in the first quarter in the next three quarters combined.

Speaker #1: So we expect lesser activity on that end from a closure perspective. And outside of that, we expect business as usual. We have sufficient reserves in place on our inventory right now.

I think there's 2-fold 1 that's year-over-year Revenue growth that you saw 2 quarters in a row around. Brian, we usually see Revenue growth in 4. First first fourth quarter, the first quarter and then you'll see tremendous Revenue growth in second and third quarters, which are usually our strongest quarters but we're looking year-over-year growth. And when you look at the last year, first quarter, you know, we had 31 stores and we're down to 19 stores, you know, 19 locations right now and you're still seeing Revenue growth, you know, with 12 less locations.

Brian Nagel: That's helpful. I appreciate it. Thank you.

Darren Lampert: Thank you, Brian.

That's helpful. I appreciate it. Thank you.

Thank you, Ron.

Operator: Thank you. Your next question comes from Mark Smith of Lake Street. Please go ahead. Your line is open.

Speaker #1: So we don't expect quite the impact that we had in Q1 throughout the duration of 2026.

Mark Smith: Hi, guys. I wanted to dig in just a little bit more on some of the inventory in the closed locations and sales. You know, I realize this puts some pressure on gross profit margin, you know, as you were clearing some of this out. I'm curious if you can quantify at all, maybe, you know, how much of the sales kind of came from these closed locations inventory, you know, and if there's still some inventory out there to work through in Q2.

Thank you, and your next question comes from Mark Smith of Lake Street. Please go ahead, your line is open.

Speaker #5: Yeah, Mark, also on the other side of it, there was certain margin pressures from tariffs in the first quarter. One of our largest products or largest internal product is charcoal.

Speaker #5: And we were dealing with 50% tariffs in the first quarter. So again, products that came in usually third, fourth quarter had a very large tariff on it.

Speaker #5: So those will start dissipating also going into the second quarter. As new product comes into RoGen. So besides what you saw, margin degradation with closed stores and some inventory, you also saw some tariff impact in the first quarter.

Hi, guys. Uh, I I want to dig in just a little bit more on some of the inventory, uh, in the closed locations and sales. Uh, you know, I realize this, this puts some pressure on gross profit margin you as your clearing some of this out, but I'm curious, if you can can quantify it all. Maybe, you know, how much of the sales uh, kind of came from these closed locations, inventory, you know. And if there's still, uh, some inventory out there to to work through in Q2

Gregory Sanders: Yeah, Mark. In the Q1, we closed 4 locations and, you know, with that, we include some level of detail in the adjusted EBITDA add back schedule. We estimate that the actual impact on gross margin was about a point and a half to kind of push us back into guidance range if we hadn't closed those locations from, you know, activity that's really twofold. One is what ends up getting discarded, and 2 is what's liquidated throughout the course of, you know, the pre-closing activity. There's incremental freight and certain things potentially as well in terms of moving the inventory from those activities.

Yeah, Mark. So in the the first quarter we closed 4 locations.

Speaker #1: Perfect. And tariffs was actually my next question. Just kind of curious, impact on tariffs, what you're looking at today and if you can quantify it all.

Speaker #1: Greg, maybe any potential refund that you get on tariffs.

Speaker #4: Yeah, I mean, like all companies right now that had tariff impact over the last year or so, we're actively pursuing claims that could be refundable to the business.

Gregory Sanders: I think when you look at the business and maybe the outlook for the rest of 2026, I don't think you'll see as many closures as we had in Q1 in the next 3 quarters combined. We expect lesser activity on that end from a closure perspective. You know, outside of that, we expect, you know, business as usual. We have sufficient reserves in place on our inventory right now. We don't expect quite the impact that we had in Q1 throughout the duration of 2026.

Speaker #4: It's too early to comment on what the impact might be. I think all companies are wrestling with kind of the forward-looking expectations through the federal government.

And, you know, with that we include some level of detail in the adjusted, Eva to add back schedule, we estimate that the actual impact on gross margin was about a point and a half to kind of push us back in the guidance range if we hadn't closed those locations from, you know, activity that's really twofold. 1 is what ends up getting discarded and, and 2 is, what's liquidated throughout the course of, you know, the pre-closing activity. Um, and then there's incremental Freight and certain things potentially as well. And in terms of moving the inventory from those activities. And um, I I I think when you look at the business and maybe the outlook for the rest of 2026,

Speaker #4: But we are pursuing our IEPA refunds and are hopeful that things will progress in a way that will help the business throughout the back half of the year or into 2027, depending on timing and how things continue to progress.

I don't think you'll see as many closures as we had in the first quarter in the next three quarters combined. So we expect less activity on that end from a closure perspective.

Speaker #1: Yeah. Great. Thank you, guys.

And you know, outside of that, we expect, you know business as usual we have sufficient reserves in place on our inventory right now. Um, so we don't expect quite the impact that we had in q1 throughout the duration of, uh, 2026.

Darren Lampert: Mark also on the other side of it, you know, there was certain margin pressures from tariffs in Q1. You know, one of our largest product or largest internal product is Char Coir. You know, we were dealing with 50% tariffs, you know, in Q1. You know, again, products that came in, you know, usually Q3, Q4 had a very large tariff on it. Those will start dissipating also going into Q2, as new product comes into GrowGen. You know, besides what you saw margin, you know, degradation with closed stores and some inventory, you also saw some tariff impact in Q1.

Speaker #4: Thanks, Mark.

Speaker #2: Thank you. And there are no further questions at this time. I'd now like to turn the call back over to Darren Lambert, chairman, co-founder, and CEO for Closing Comments.

Speaker #5: Thank you. I'd like to thank our shareholders for their continued support. And we look forward to updating you on our second quarter results in August.

Speaker #5: Thank you very much. And have a beautiful night.

More also on the other side of it, you know, there was certain margin pressures from terrorists. Um, in the first quarter, you know, 1 of our, our largest product or largest internal product is charcoal and, you know, we were dealing with 50% tariffs, um, you know, in the first quarter. So, you know, again, products that came in, you know, usually third fourth quarter, had a very large tariff on it. So those will start dissipating. Also going into the second quarter, um, as new product comes in, to grow Jen. So, you know, besides what you saw a margin, you know, degradation with clothes stores and some inventory. You also saw some, uh, tariff impact in the first quarter.

Mark Smith: Perfect. Tariffs was actually my next question. Just kind of curious, you know, impact in tariffs, what you're looking at today and, you know, if you can quantify at all, Greg, maybe, you know, any potential refund that you've yet on IEEPA tariffs?

Perfect and tariff suicide by my my next question. Just, just got a curious, you know, impact and tariffs. What you're looking at today and, you know, if you can quantify at all, um, if you're like maybe, you know, any potential refund that you can get on,

Gregory Sanders: Yeah, I mean, like all companies right now that had tariff impact over the last year or so, we're actively, you know, pursuing claims that could be refundable to the business. It's too early to comment on what the impact might be. I think all companies are wrestling with, you know, kind of the forward-looking expectations through the federal government. We are pursuing, you know, our IEEPA refunds and are hopeful that things will progress in a way that will help the business throughout the back half of the year or into 2027, depending on timing and how things continue to progress.

Yeah. We're I mean like all companies right now that had tariff impact over the last year or so we're actively, you know, pursuing claims that could be refundable to the business. Um it's too early to comment on what the impact might be. I think all companies are are wrestling with

You know kind of the the forward-looking expectations to the federal government. But we are we are pursuing, you know, our our iipa refunds um and are hopeful that things will progress in in a way that will help the business throughout the the back, half of the year or into 2027, depending on timing and how things continue to progress

Mark Smith: Yeah. Great. Thank you, guys.

Great, thank you. Yes.

Operator: Thank you. There are no further questions at this time. I'd now like to turn the call back over to Darren Lampert, Chairman, Co-founder, and CEO, for closing comments.

Darren Lampert: Thank you. I'd like to thank our shareholders for their continued support. We look forward to updating you on our Q2 results in August. Thank you very much. Have a beautiful night.

Thank you. And there are no further questions at this time. I'd like to turn the call back over to Darren Lampert. Chairman co-founder and CEO for closing comments.

Thank you.

I'd like to thank our shareholders for their continued support.

And we look forward to updating you on our second quarter results in August. Thank you very much and um have a beautiful night.

Operator: Ladies and gentlemen, this will close today's conference. We thank you for participating and ask that you please disconnect your lines.

Ladies and gentlemen, this is blue. Today's conference

We thank you for participating and ask that you, please disconnect your lines.