GrowGeneration Corp. (GRWG) Earnings Call Transcript & Summary

Good day, and welcome to the IAC Alpha Virtual Best Ideas Summer Investment Conference 2026. Our next presenting company is GrowGeneration Corp. [Operator Instructions] I'd now like to turn the floor over to today's host, Darren Lampert, Chairman, Co-Founder and CEO of GrowGeneration Corp. Please go ahead.

Thank you so much, and good morning, everybody. to jury day outside, the jury day on Wall Street. And certainly, I hope I can bring some light to your morning. Look forward to the presentation and hopefully bring you guys another stock that you can invest in because I certainly believe the story is just resonating right now, and I think it's just a perfect time within the cannabis industry. So I'm going to get going and certainly, we'd love to take some questions at the end of the presentation. On our next slide, which you're going to see is our forward-looking statement, take 10 seconds and look through it. It's customary and just read through quickly, and we're going to move on to the next slide. Guys, the GrowGen story. What is it -- where are we right now? I think in order to really understand the story, we need to go back to 2014, where our mission statement back in 2014 was to become the largest retailer of hydroponic equipment in the world to service the cannabis industry that was pretty much just getting started in 2014. You sort of adult-use legalization in Colorado and 420, and that was kind of the -- that was kind of the mantra for us. What we saw was an industry that was pretty much professionalizing that money was coming in. And what you saw on the other side of it was the [ pixeshovel ] side of it. There was a side that, that didn't touch the plan but help the plant grow. And we figured that this was the side of it that it was less regulation, it was easier to understand, and there was a past a NASDAQ listing. So it's something that really excited us and we got going in 2014 with a really small acquisition in Pueblo, Colorado. And the thought pattern was that as cannabis grew, and we certainly believe that it would mimic the wine and spirit industry, and it would really grow from a small industry up to $1 trillion industry and people are really looking at compounded annual growth rates through -- for many years to come in that double-digit 20% range. And we believe that as the underlying business grew people would need equipment, people will certainly need everything to grow a plant. So what we really were, we were nothing more than the pixi shovels for a growing industry. And you can see what we did in 2014 when we started, we did $1.5 million in business. We bought a few stores out in [indiscernible] Colorado. And the thought was to consolidate the hydroponic retail industry plus build our own stores along the way. In between 2014 and 2016, we brought the company public, it's a self underwriting an S-1 to [indiscernible] we got the company public with '14 to '16, we saw tremendous growth in the industry, and we kind of built out the plan for the future. We grew the business from $1.5 million, almost $8 million in those couple of years. And in 2017 and 2018, can we began this aggressive acquisition strategy. We're buying stores, and we looked at -- it was time we wanted to get to that 100 store mark. And in 2018, we had $30 million of sales and we started making money. But the explosive growth of this company really started in 2019. We did $80 million of business. We uplisted to NASDAQ. We were first ancillary company at the time that got uplisted to NASDAQ. And it was really quite a feat. And we saw this company that was growing at 50% same-store sales year-over-year. The company was growing like no one can really imagine. In 2020, we grew this business from $80 million to $190 million. But the interesting part about 2020 is we went out and we raised money. We were NASDAQ listed at the time. We went over to Oppenheimer we raised $50 million in equity financing and we followed that up at the end of the year with another $170 million from [indiscernible] but at Stifel at $30 this year. By 2021, this company grew from $180 million in revenue, up to $422 million in revenue. Adjusted EBITDA numbers were about $35 million that year. The stock exceeded $60 a share. This company was trading from a startup of $1 a share, almost up to about $3 billion market cap. And I think most people that understand the cannabis industry really saw the top of the industry at the end of 2021. Many reasons for it. There was an oversupply cannabis around the country. legalization kind of hit this pivot point that it didn't seem like it was ever happening. There was something that was called 280 taxes on cannabis growers. But the cannabis growers really couldn't earn any money. They weren't able to deduct expenses off their income statement and the one thing we always knew that we were only as strong as our customers. And our customers weren't making money, our customers weren't growing, our customers weren't building, we were going to have some issues, too. So by end of 2021, we started taking a really hard look at the initial. And we saw our issues. We saw a practice in the industry and we saw the illegal markets were still prevalent. But our customers were running into tremendous issues. They couldn't raise any more capital. They couldn't build pricing -- pricing was down about 80%. Cannabis went from $4,000, $5,000 a pound ton to $1,000 a pound and Wall Street stepped away from the industry. And I think that's something that's really, really important. What do we do in 2022 through 2024 really to kind of get us to where we are today. We reset the company. And this company was growing so quickly that we put so much money into infrastructure of this company into building stores. We went from 3 stores in 2014 up to 65 stores by the end of 2022, I think. And the question is, what do we do? And what we really started seeing was that the business-to-consumer side of the industry stopped. And we decided at that time was time to kind of put the brakes on, start taking a hard look at the portfolio and taking a hard look at everything that we've done to that date, we still believe that the industry, but we then -- we came to this conclusion with where the cannabis was growing speaking to people and just doing a lot of diligence and a lot of individuals on the street. We had almost 800 employees at the time. We're down about 200 employees right now. $130 million inventory were down at $40 million of inventory right now. We put the brakes on. We started closing stores and really transformed the business. What you're really seeing right now is when you start looking at 2024 to 2026. The business just changed. And when you saw really on the sales side of in '21, we reported to $22 million of sales, we dropped to $278 million in '22, down to $225 million in $23 million, down $188 million in '24 and $161 million in '25 million. So you saw the tremendous, tremendous aggregation in sales. This year, we're forecasting $162 million to $168 million. So this will be our first year of upward momentum. We just saw 2 positive quarters of year-over-year growth. But what you see right now when you look at this company, that was fully transformed and you'll see it throughout my presentation. We're now down to 19 locations from 65 locations. As I said, inventory is down from about $130 million to about $40 million of inventory. And we still have $41 million cash on our balance sheet with no debt. And we have told Wall Street that we will be EBITDA positive this year, coming off a $6 million loss last year and a $16 million loss in 2024. And this is with -- again, with 20 store closures over the last couple of years. So business is going in the right direction. And what we really have done in the last couple of years is we started bringing products to market. We turn GrowGen almost into a CPG company. And you're going to see products that we've brought to market and they got of products are selling, and they're growing quickly, high-margin products, but also have tremendous verticals to them, we believe on garden ag and distribution overseas. So it's something right now when you look at GrowGen, it's not the -- we're not a retail company anymore. We're a B2B company, business-to-business with a tremendous, fast-growing CPG component of it, which is the stickiness of it. And throughout the presentation, again, you guys will see that for me. Next page, please. Why Gojek? Why invest in GrowGen right now? First, it's trading basically at cash and inventory that I can tell you. And we have some tremendous assets again within this company. We have a company called MMI that we'll discuss a little later, which is something that we bought in 2021. It's a vertical benching and racking company for agriculture. But more importantly, most of its business right now is in mobile benching that moves and it's something it's a $27 million business, earning about $7 million. It's a tremendously valuable asset that's sitting on our balance sheet right now. What you have is high-margin proprietary brands driving sustainable growth at GrowGen. We've built a private label division from next to 0 to 37% of sales as of last quarter. Last year, it was 32%, 26% the year before. We're forecasting right now about 40% by the end of the year. And it's really helping our revenue mix, as you saw in the first quarter. It's helping margins. Margins in the first quarter were 25.5% something that certainly didn't make me happy. We closed 4 stores in the first quarter and took some write-downs on inventory. But we are expecting, as we told Wall Street 28% to 29% margins this year, we believe that goes into the 30s next year. So you will see increased margin, increased profitability throughout the year this year. We've diversified our markets across controlled environmental at -- and for people who don't know what control the CEA is controlled environmental ag, it's growing indoors. It's controlling environments to get best yields, best quality and the same plant every time. One of the things was growing outside you're dependent on weather, growing inside you're not. So everything is -- again, everything is built these days and doors, control systems people aren't feeding plants anymore and working around facilities. Everything is on automatic everything is automated. And that's what we do. That's what we sell. That's our specialty. And we believe right now that 90% of Foods festivals are coming in from overseas, that's going to change. Our main business still is cannabis, it's 85%, 90% of our business. But we believe as the use go on, as you'll see later in the presentation that we are diversifying into lawn and garden into ag. And Intel overseas, we believe that's going to certainly drive growth into the future. Right now, we have a debt-free balance sheet over $41 million in cash, over $40 million of inventory paid for. A CPG component of GrowGen, our private label brands that we own, that's a $45 million to $50 million business right now and growing, and we also own MMI. And our progress to profitability is pretty clear. lost $16 million on an EBITDA basis from '24 lost $6 million last year. This year, again, total Wall Street will be a bit a positive. And we believe that we keep growing into the future on those numbers. And right now, as I said earlier, you're buying GrowGen for cash and inventory. Next still. The strategic evolution of GrowGen, it's gone from typical retail, forming typical retail, expensive stores, shrinkage, inventory loss, that whole 9 are of running a retail platform. We've turned it into a B2B platform, commercial focused, 2 large warehouses, 100,000 square feet in Ohio, 60,000 square feet in Sacramento a lot of the stores that we do on, we don't call them stores anymore. There are more hubs for us. We use those as many hubs for shipping, for marketing. And again, most of these places are right by where our commercial customers are. So easy shipping and just easier for our customers. Right now, we have platforms that can go online and purchase websites, we have portals for our commercial customers. So we've totally evolved stopping at GrowGen from going into the stores from nothing more than direct to farmship is commercial salesmen, we have facility advisers when people have issues, we send people to the facilities to help them fix their issues. And that's really what GrowGen has gone. It's much more efficient than the store and then the stores that we used to own. And we've cut millions and millions of dollars from our expense lines basically closing stores and just turning it into a B2B more online business, commercial salespeople, affiliates in different ways to sell. Controlled Environmental lab, we are the leader right now within the industry we're in. As we grow up, we want to be a leader also in the ag side of it. But like anything else, it's going to take time, but we are moving and moving in the right direction. Proprietary brands has been growing double digits every year. This year is no different. We believe we'll hit that 40% mark this year, up from 32% last year in '24, I think, the year before. And from there, we do believe we go into the 50s by '27/'28 diversified distribution strategic reach, again, we reach everywhere. So through our warehouses and through our shipping and transport in our supply chain, we reach every customer in the country right now. And we are starting to expand in Canada international markets through distribution channels and distribution agreements that we've signed with some nice sized companies overseas. Next, Phil. Guys, the growth flywheel. It's an interesting slide. It's the commercial cultivation side of it, controlled environmental ag side of it. And what it's really doing, it's lumping what we're doing with our proprietary brands, the market expansion, the B2B and digital infrastructure scaling that we're doing and the consolidation of our stores. And that's what's gotten us here today. Every time we do close a store, we lose some business. There are people that still enjoy walking into stores and shopping in stores. So we've basically -- we've gotten rid of a but we've lost a tremendous amount of our small consumer customers, and they do add up. But we're starting to make it back both on our private label division sales on our portal sales and overseas sales. So and also into lawn and garden. So what we're doing is working. Next up. Expanded market opportunity. What this slide I'll show you guys, it's just the total addressable market of where we are right now and what we're moving into. The CEA infrastructure market that's controlled environmental ag, that number includes a lot of different areas right now. We're looking at cannabis cultivation at a couple of billion greenhouse produce at $6 billion specialty crops and another $4 billion international Garden markets and CapEx infrastructure. So what we're doing is we're widening our TAM. When we look at where we were on the cannabis side of it, the TAM wasn't big enough. And we believe that we needed to grow the TAM. And what do we do to grow the TAM, we started taking products that we brought to market through basically from start to finish, we have our own marketing division general packaging division at GrowGen. We have our own, again, registration division at GrowGen. But more importantly, we have the staff that understands what growers need from cannabis to specialty crop. We use a lot of farms out in California to trial these products through testing through labs. So really from start -- from inception to launch. And we've done a tremendous job at it. And when I show the products that with in the next slide is the products that we brought to market to get a better understanding of really what we're doing on the consumable side of it and really the legs that it has into the future. Okay, these are our brands. [ Driphydro ] was launched about 3 years ago, the powders were about a year ago. It's the most cost-efficient soluble nutrients on the market today. Healthier plants, richer terpenes, tighter controls on each feed. This is about $1 million a month product for GrowGen right now but growing double digits. It only entered the market, as I told you a couple of years ago. It's something that really excites GrowGen right now. It's in hundreds of trials across the country right now. Every time you switch a feeding schedule for a roller out there, you go through trials. It's trials, sending our technical advisers out to the larger farms in the country and it's changing for irrigation systems and everything else. There's only 1 way to get it done. One is price, 2 is quality and 3 is yield. If you hit all 3 people are willing to switch if you don't, they're not and DRIP is hitting those marks and metrics. So we're starting to sell drip overseas right now. And we believe that this is going to be a double-digit grower for many years to come. Char Coir right now is the cream of our private label division. It's a $25 million product and growing. There's a lot of different segments of Char Coir right now. But Char Coir comes in from India's single-source operator, RFP certified. We are one of the #1 cocoa sellers in the country right now. It's replacing Pete. It's a growing media. We sell in a lot of different ways. It comes in Cocoa pods. So pods to growing a plastic part, people are now growing in cocoa pods. It's a much easier way to grow healthier way to grow. We believe a much quicker uptake in roofs and this is a product that we have launched a lot of different products under that same name. It's going into an and Garden. We just launched Coco [indiscernible] for propagation which starts a plant's life, and we believe that this product will be in every 1 and Garden store in the country in years to come, and we couldn't be any more excited about it. In Lighting is our Lighting division. That's a $5 million-plus division for GrowGen right now. And our lights, we believe are best of breed. And it's been a decent division for GrowGen. Power [indiscernible] is a silicon product that we've owned for about 6 years right now. It's a pretty steady product for GrowGen. We do also believe it's going to be in the line garden. So those are kind of our bigger products, MMI Storage Solutions is almost a $30 million business. We bought it at a $10 million run rate. It's a company that we believe is worth in excess of $50 million by itself right now, which we get no value for. We put it up for sale a couple of years ago. We had offers up in the high $30s to $40 million mark, and we didn't take it because the amount of money it was making. And it is growing. It's back to growing this year. It's something that we're pretty excited about. Harvest company is something we launched a couple of years ago. It's growing probably 100% year-over-year right now sells into Home depot, into [indiscernible] online and getting into some more of the big box stores online, and we believe they'll be in the stores over the next couple of years. The harvest company is the [indiscernible] to grow. It's scissors, it's pots, it's trees, it's clubs. It's all everything you need to grow a plant, whether it's cannabis or whether it's a typical law and garden, something that if you went on to its website, each one of these products have separate Instagram pages separate websites. You can go online and buy them at growgeneration.com. Something that's really excited love to go take a look at these products, the packaging, the quality of these products, we believe, best-of-breed in lawn and garden. Next, please, Phil. Guys spending into mainstream on and Garden. We spoke about it. Some interesting things. Viagra we acquired about a year ago had agreements with Home Depot and Lowes and some of the other big box stores. They were pretty far in small online retailer into lawn and garden. We've done a lot with it. We've changed packaging, certainly have helped with supply chain, purchasing and everything else. And again, it's a growing business for us. We've basically everything from Viagrow now sells under the Harvest company name. We signed an agreement with Arricale a little over a year ago to distribute these products into thousands of IGC stores. It's been slow, but we do believe that you will see pickup there. And we couldn't be any more excited like anything else first you're getting into lawn and garden takes time. It's usually a couple of year uptick, and then you should see steady sales growth thereafter. But we will keep everyone posted again on our and our size as we move into lawn and garden. Next Phil. Supply chain advantages. As I said, we have 2 large distribution centers right now in 4 hubs, we can ship anywhere in the world with anywhere within our country within a day or 2. Just-in-time, mixed pallets. So if we make the lives of all our customers much easier. And again, it's something that we are getting better at every year like anything else, price and gas is certainly hasn't helped. I don't think it's helped anyone on the supply chain side of it, but we are getting more efficient. We are starting to charge a slight charge because of transportation costs right now. But it's something that has helped us close stores and really cut expenses over 50% out of this company. Next. Why GrowGen, Why now? Catalysts converging in 2026, the cannabis rescheduling. They just rescheduled the medical cannabis from 1 to 3 really, what that does bring money back into the industry, 28 taxes, cannabis companies right now were unable to deduct expenses off of income. But what you will do is what you will see is more money coming back into the industry, more research coming into the industry. This week, hearings are starting to hopefully reclassify recreational cannabis. And I think the hearings will be a couple of weeks, and we should have some news in July on that. The CDA market secular tailwinds, guys, it's happening. Mean growing is happening when people are starting to grow in doors. And again, it's a specialty. It's working with, again, control systems, and irrigation systems. Dusit it's basically replacing the outdoors to make more consistency out of our crops. So again, it's something that's here and it's only getting bigger. Cost structures you can read through at 23.5% OpEx reduction first quarter of '26. We've taken out $27 million to '25 so 19 stores profitable footprint, normal restructuring charges, $41 million cash, no debt, 3 years of operating runway. So again, guys, now is the time. We spent the last 3 years rightsizing this business, the set of cost structure, brand platform market catalysts. Everything is aligned right now. we have a $10 million buyback, $10 million buyback that we instituted about 6 months ago. We did a $6 million buyback a couple of years earlier. You've seen insider buys over the last 3 years. So the insiders believe in it. The company believes in it. And it's just the market is starting to believe in it, and we think it's -- we think that this company turns profitable, you'll see the market come back to it. Next leadership team. I'm our CEO, Co-Founder and Chairman of our Board. Been an attorney -- securities attorney since 1985, traded on Wall Street and have been running GrowGen since 2014. Michael Solenis our Co-Founder and President, he's been, again, founded this business in 2014 an incredibly gifted marketing and sales on sales and marketing side of it and also the public market side of it. Greg Sanders -- he was our controller for 4 years before coming to CFO. So Greg has been with us for some time. It comes with a wonderful background, and it does a tremendous job no maturity. We had no material weaknesses within our financials this year. I haven't missed one since we started back in 2016 on the public markets. Next Financial highlights. The first quarter of $38.5 million sales, 37% private label, 20% to 25.5% gross margins we believe that you'll see that much higher this quarter and going into the future. OpEx down. Everything is going in the right direction, guys. And you can certainly see from taking a look at it. Next, Phil. Adjusted EBITDA page, you can look through this. I certainly don't need to explain to you. Next why GrowGen,I think guys we've gone through this. And again, I think we've got a minute for questions. So I'm going to take a question or 2, and then we're going to end it I think we have no questions, so I'm going to wrap it up. It was an absolute pleasure and again, if anyone has any questions, please give me a call or give Bill Carson call, and we certainly will get back to you on it. But again, I think the time is now a company is buying back stock and again, you're buying a company really for inventory and cash right now, a company that is going profitable, and we believe it will be profitable for many years to come. Thank you, and have a beautiful day. And look forward to sharing our second quarter numbers with you guys in August. Thank you.

That concludes GrowGeneration Corp's presentation. You may now disconnect. Please consult the conference agenda for the next presenting company.