Good morning, ladies and gentlemen. Thank you for standing by. Welcome to GrowGeneration Corp. 2021 third quarter conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for analyst questions. If you have a question, please press the star followed by the one on your touchtone phone. If you would like to withdraw your question, please press the star followed by two. If you're using speaker equipment, please lift the handset before making your selections. This conference is being recorded today, November 11, 2021, and the earnings press release accompanying this conference was issued this morning. I will now turn the call over to John Evans, Investor Relations. Good morning. I would like to welcome everyone to GrowGeneration's third quarter 2021 earnings conference call. With us this morning is Darren Lampert, our Co-founder, Chairman, and CEO, Michael Salaman, Co-founder and President, and Jeff Lasher, our CFO. After management remarks, there will be an analyst Q&A session. As always, we expect to make forward-looking statements this morning, but we want to caution you that our actual results could differ materially from what we say here. Such statements can be identified by terms such as believe, expect, intend, and may. You should not place undue reliance on forward-looking statements. Actual results may differ materially from those forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued this morning, as well as risks and uncertainties included in the section under the caption Risk Factors in Management's Discussion and Analysis of Financial Position and Results of Operations in our annual report on Form 10-K filed with the SEC and any subsequent Form 10-Qs and Form 8-Ks filed with the SEC. Following prepared remarks today, we will open the call for questions. I'd also remind everyone that today's call is being recorded and an archived version of our call will be available on our website later today. I will now turn the call over to our CEO, Darren Lampert. Thank you, John. Good morning. Before I begin with my prepared remarks, I'd like to thank each and every one of our employees and customers for their continued hard work, dedication, and loyalty. Our best-in-class staff is now over 740, with over 500 of our teammates experienced Grow Pros. We have created the largest sales team of hydroponic product specialists in the country. We had a strong record third quarter with revenue of $116 million in the quarter, a 111% increase year-over-year, with a 15.7% increase in same-store sales. The company earned $0.07 per share on GAAP net income of $4 million, which is burdened by amortization and income taxes. Adjusted EBITDA grew 63% to $10.8 million for the third quarter 2021 or $0.18 per share versus $6.6 million for the third quarter 2020 or $0.13 per share. Inventory increased to $113 million, and we ended the quarter with cash and marketable securities on hand of $93 million. Like all commodity products in emerging industries, you see from time to time an imbalance in supply and demand. We've experienced these imbalances before in California, Colorado, and Oregon, and now once again, these states, California and the West, are dealing with oversupply positions that have created downward pressure on the cost per pound of flower. This is a short-term issue as growers will either sell through their inventory or have to dispose of it as the flower has a freshness and effective expiration date. Supply chain headwinds had an impact on shipping container costs and securing some products, but GrowGen's purchasing team has gotten ahead of the inventory, so we're in a very strong inventory position heading into Q1 2022. Despite supply chain and construction delays, we opened two new superstores in L.A. that serve as logistic hubs for the important Southern California market. We're building for the future and have 37 states of growth in front of us. However, customers in a few key states, including California, Colorado, and Oregon, are taking a wait and see approach on building and outfitting cultivation facilities as the market sells through excess cannabis inventory. In addition, there has been a slowness to build in new markets in legalized states as cultivators wait for the rollout of rules and regulations which are behind schedule. We believe the majority of these issues will be rectified by the second half of 2022. Accordingly, we are adjusting our annual revenue outlook to $435 million-$440 million and adjusted EBITDA guidance for the year of $41 million-$43 million. Evidence that our Grow Pro strategy is working is the explosive success we are having selling our lineup of private and proprietary brands. Power Si, Char Coir, Ion LEDs, DuraBreeze fans all saw market acceptance and growth in 2021. Power Si is now in over 500 independent hydroponic locations across the U.S. and sells now in Canada, U.K., and Europe. Our ability to distribute our proprietary brands beyond our retail footprint is a future driver for our company. What excites us as the leader in the hydroponic and indoor gardening space is the future we see over the next several years. This week, Congresswoman Nancy Mace announced a Republican-backed proposal to legalize cannabis nationally, treating cannabis as an agricultural product, regulated like alcohol. States are allowing home growing, as previously announced in New Mexico, Virginia, Connecticut, with strong support for proposals in New York and Florida. At present, we operate stores in 13 of the 18 states that have adult use laws, and we plan on expanding our states to 18 in 2022. Throughout 2021, we've been building for the future, and we are in this for the long term. No company is better positioned to take advantage of federal legalization of cannabis than GrowGeneration. We see a tremendous opportunity in the vertical farming agricultural market as more and more states face the challenges of climate, drought, water shortages with outdoor growing. GrowGen has built garden centers for a new generation that are growing for their own personal consumption, food production, and plant medicine. This demographic group is seeking the latest technologies to grow indoors and are energy and conservation conscious, choosing hydroponics as a better way to grow. In order to position the company for 2022 and beyond, we have made several strategic decisions. Most importantly, we've organized the management team to focus the enterprise around key deliverables. Over the past several months, we have brought on key leaders, including Paul Rutenis to take over as Chief Merchant and lead the private label and proprietary brand growth, Dennis Sheldon to run technology and supply chain, Becky Gebhardt to run e-commerce and marketing. These individuals bring exceptional talent, expertise, and experience. They are leading the organization into 2022 and beyond. This shift allows our Chief Operating Officer to focus exclusively on new store development, retail store acquisitions, and execution of retail operations to drive that segment of our business to higher cash generation in order to fund growth initiatives. All four of these leaders will report to my co-founder, Michael Salaman. In addition, we've established an industrial sales organization to exclusively work with large cultivation operations that will be serviced outside of our retail store system. This industrial sales team will also report to Michael. As we focus on long-term growth plans, we've established efforts across the portfolio of the business. The following five customer-focused initiatives will be key to EBITDA generation efforts to improve results. First, we have focused our energies for 2022 on new greenfield locations across new states and new store greenfield growth. There are still acquisition targets that will be added over the next couple of years, but in emerging states, we believe a greenfield strategy will produce higher returns on investments. Second, we are investing in company-wide technology to drive operational excellence in our retail stores. Our present ERP system is limiting our ability to scale and keep up with our growth. Our third initiative is related as we plan on establishing a network of distribution centers in key locations to serve our retail stores. At present, most of our product is shipped directly to stores, and our proprietary brand fulfillment is handled by third-party logistics providers. We'll be using best-in-class technology to drive order management and warehouse management systems integrated with new POS and ERP systems launching before summer of 2022. Our fourth initiative is driving sales of proprietary brands and private label sales in our retail stores. This includes investments in resources to provide customer service, product development, and distribution excellence. Over the long term, this will provide a platform for penetration, and our goal in 2023 is to have 25% of sales coming from private label and proprietary brands. Finally, we plan on integrating our three main e-commerce web stores into one common back-end platform that will serve our customers better with improved product selection, common pricing, product availability, and the resources to assist customers with solutions to their problems. All of these initiatives will require a team-oriented approach, and we believe the management team in place now is better suited than any other team in the industry to drive profitability growth over the next decade. I will now turn the call over to Jeff Lasher, our CFO, who will give a little color to our initiatives, some insights into Q3 results, and our views of what 2022 looks like. Jeff? Thank you, Darren. Let me start by building on what Darren laid out for future initiatives. I will address Q3 results and what our business looks like in 2022. Our investment focus in 2022 will shift toward greenfield locations. We were very pleased with the customer reactions to our new locations in California. We believe we can modify the size of these locations while keeping the selection and service. Our 15-20 new locations will range from 5,000-15,000 sq ft of retail selling space, along with outdoor facilities to serve bulk sales. That capital investment will be $1 million-$2 million per location, including inventory. These locations will be in emerging states such as New Jersey, New York, New England, Pennsylvania, and Illinois. Over time, this will reduce our reliance on California, which presently represents 26% of sales in mature markets, including Colorado, Washington, and Oregon, which represent 13% of sales. The investment of $15 million-$30 million in 2022 will be combined with an investment in technology to improve operational metrics in the stores. Our revenue has grown 153% over the same period in 2020, and our store operating expenses have grown 185%. To drive profitable growth in 2022, we recognize the need to invest in efficiency of store operations. The key initiative of technology in 2022 has been an organizational effort that spans across functions. We will be moving to a new solution powered by Oracle and Manhattan Associates to replace our existing systems. We will have a retail technology stack in line with best-in-class retailers of similar size with Oracle's NetSuite ERP coupled with point of sale, order management, and warehouse management systems integrated by Manhattan Associates. We have partnered with the best providers in retail to use technology as a customer-centric competitive advantage. This will result in additional operating costs over the next 180 days as we prepare for an early second quarter launch and add to our fixed asset base by about $5 million. We believe the project will produce substantial ROI. The new smaller retail locations will be serviced by a network of distribution centers that will feed the retail stores with inventory and be less than a day away from sites they serve. This will allow us to consolidate inventory, improve procurement cost of goods, and be more customer-focused in stores. Our existing locations in Sacramento, Long Beach, and Tulsa will be the foundational pillars of this new strategy. In 2022, we will bring on online additional facilities to serve the Midwest and East Coast locations. At present, Michigan represents 15% of sales and New England is over 10% of sales for the company, but neither are served with a distribution center. Alongside the retail store plans, we have established a strategic plan to grow private label offerings and proprietary brands. At present, we have two proprietary brands, Power Si and Char Coir, along with our exclusive private label brands sold only in GrowGeneration locations that represent about 9% of our sales in the third quarter. Our plan is to be 25% of sales by 2023. This will produce a meaningful impact on gross margins. We see our ability to connect with customers with best-in-class products, including quality GrowGen exclusive offerings, as the best win-win for customers and the company. We intend to increase turnover through SKU rationalization and utilizing the distribution center strategy, which allows us to right-size inventory. This will result in better operational results, increased gross margin, and increased inventory turnover that drive materially better cash from operations as early as spring 2022. However, this strategy in 2021 has resulted in an investment in the long lead time supply chain. Our inventory at the end of Q3 was $113 million and has grown $59 million this year. Of that growth, $13 million was acquired in acquisitions and $13 million was associated with growing the offerings of private label. In addition, we have used our capital capabilities to secure production of product overseas through prepaid inventory purchase commitments with long lead times in advance of spring 2022 needs. Our final initiative is associated with e-commerce. At present, the company has a variety of back-end processing software. Our core system is run on Adobe's Magento platform, and we will be migrating all of the sites to that engine over the next few quarters. We do not expect any material impact from this change for our customers, but it will lower the cost of operation and drive profitability in this area. Turning attention to the quarter, revenue for the quarter was $116 million compared to $55 million for last year, an increase of 111% or $61 million. The increase in revenues is primarily attributable to a $29 million increase in revenue related to stores acquired since first quarter 2021. A $6.6 million increase in e-commerce revenue as that channel grew from $3.9 million to $10.5 million. $8 million or 15.7% from 25 comparable stores operated for the full quarter in both 2020 and 2021. Sales from stores open last year in the second quarter increased from $51.2 million to $59.2 million. Our same store sales comp base for the third quarter was over $55 million. In the fourth quarter, we anniversaried several acquisitions that will increase that base of stores throughout 2022. However, our location in the Miami area has relocated and will drop out of the comp base. Gross profit margin was 29.4% for the quarter, up 290 basis points from prior year. Driving this margin expansion was an increase in revenues from both private label products and distributed products, which were 9% of revenues for the quarter, compared to less than 1% of revenues for the same period last year. Gross profit dollar generation was up 134% from prior year, from both increased revenue and margin expansion. Total operating expenses in stores grew from $5 million in prior year to $14.8 million in Q3 2021. Included in that spend is pre-opening spending for all of our nine new large format locations in Southern California and Oklahoma, as well as pre-opening relocation expenses for Miami and Arizona. This represented a one-time expense of about $1 million that will not recur as we move to smaller locations in future years, and we expect the investment into new stores and relocations for 2021 will pay dividends in the future. In addition, we have modified labor hours in the fourth quarter in line with revenue. On a year-over-year basis, we added 37 locations. The quarter-over-quarter increase in store operations expense was $2.2 million and was primarily explained by these investments in pre-opening costs, labor initiatives, and additional locations owned for the full quarter. Selling general administrative costs increased from $4 million to $11 million in Q3 2021, more than explained by support costs for the enterprise, including the cost associated with establishing the infrastructure necessary to continue to profitably grow this business in future periods. Included in this quarter's SG&A was an expense associated with the HGS acquisition, and we expect another $500,000 of expenses associated with that termination in the fourth quarter. Of the $11 million of SG&A, $2.1 million was associated with stock-based compensation. Amortizations of intangibles was $2.5 million in the third quarter. We expect $2.7 million of amortization in Q4, along with $1 million of depreciation, in part from new store openings that have added to our depreciable base. It is important to remember that as we grow in size and scope, depreciation and amortization expense will continue, and we forecast that amortization will be $11 million in 2022 associated with acquisitions over the last couple of years. The company had an interest income of $450,000 associated with notes receivables that were settled in Q4 and investment activity in marketable securities in the quarter. Income tax expense was $1.1 million in Q3, and for the fourth quarter and in early 2022, we expect that our effective tax rate will be higher than statutory rates as a result of disallowed deductions in federal taxable income from intangible amortization, increases in non-cash provisions, and share-based compensation. This is an impact of growth. As we shift to new store development in lieu of acquisitions to grow the store count, we will benefit from bonus depreciation of asset additions for tax purposes in late 2022. Net income for the quarter was $4 million, compared to $3.3 million for the same period in 2020. Net income was $0.07 per share. Adjusted EBITDA, which excludes the expenses associated with interest, taxes, depreciation, amortization, and share-based compensation, was $10.8 million for the quarter, compared to $6.6 million in 2020. As discussed earlier, we had expenses associated with new store additions, relocations, expansions, and other expenses in excess of $1.5 million for the quarter. The company ended the quarter with $63 million of cash and $29 million of marketable securities that are mature and available for sale if needed. Total liquidity is $93 million at the end of September. Net cash used in acquisitions and other investments totaled $24 million for the third quarter of 2021. As discussed, we estimate that revenue for the full year will be $435 million-$440 million based on recent trends in our 62 garden centers and two proprietary brands. We estimate that EBITDA, adjusted for share-based compensation with those operations, will be between $41 million and $43 million. Included in that expectation is the burden of termination expenses associated with the HGS acquisition of about $500,000. We look out to 2022 for early planning efforts. If we had owned all 62 locations, our e-commerce businesses, and Char Coir for the full year of 2022, that combination of business would have generated about $475 million in total revenue. Included in that annual figure is $35 million in combined e-commerce sales that are accelerating rapidly and should generate growth of 20%-30% in 2022. Our proprietary brands of Power Si and Char Coir that we sell outside of our retail locations make up about $20 million of total revenue and should see growth next year in the teens. We will add 15-20 new stores in the later portion of 2022. That should generate incremental sales of $1 million-$2 million per location in 2022. In total, we expect our overall growth rate in 2022 will be in the high teens or better. Just as importantly, we believe that our additional investments in technology, distribution capability, and private label sales will increase gross margins that will more than offset adjusted EBITDA margin impact of added SG&A and store operations expense. I will now turn the call back to Darren. Thank you, Jeff. Our third quarter record results were achieved only through the relentless efforts of the best team of professionals in our industry, the strength of our supply chain, and our commitment to provide the best of breed and latest innovative products to our customers. GrowGen has a tremendous team of essential employees who have made a commitment to our company and customers, and I could not be any prouder. I am inspired by their efforts and dedication as they have worked tirelessly to service our customers and communities. Our future success revolves around execution efforts in new stores, technology, distribution centers, product offerings, and e-commerce user experience. We believe we have the best team in the industry to deliver that execution. I will now turn over the call for questions. Thank you. Ladies and gentlemen, as a reminder, please press star one to ask a question. The first question today comes from Brian Nagel of Oppenheimer. Hi, good morning. Good morning, Brian. My first question, guys. Just with regard to guidance, and maybe Darren, you spoke about this in your opening comments, but maybe just drill down a little bit more so we can understand better. You know, what really changed from the expectations that were revised and laid out, I guess it was on October thirteenth with the HGS announcement and then today's announcement, what both from a revenue and from an EBITDA perspective? Thank you. Yeah, Brian, I'll start, and then I'm gonna turn it over to Jeff. As you know, GrowGen had an exceptionally strong second quarter, which was fueled by the demand for what we saw was outdoor growing. During the last year, our store concentration in California and Colorado markets have increased 26% in California, 13% in Colorado, Oregon, and Washington. We are now seeing the impact of that oversupply position on cannabis that we believe will be exaggerated in the fourth quarter. We see the oversupply correcting itself in the second half. During oversupply positions, cultivators slow down their purchasing of hydroponic equipment. In addition, we've seen a slowness in new states to roll out rules and regs to enact adult use and to issue cultivation licenses in new markets. On the flip side, we saw many positives in the third quarter. Revenue was up 111% at $116 million. Same-store sales were up 15.7%. Gross profit margins, 290 basis points to 29.4%. We successfully launched two flagship stores in L.A. and Long Beach. There were many positives in the quarter. As you've seen from even the Scotts conference call with Hawthorne, you know, business has slowed going into the fourth quarter. You know, we look back in our second quarter, the strength was incredible, and it was a lot of the outdoor growing that is now coming back to bite us a notch. Business remains strong, the industry remains strong. We're seeing a tremendous move towards legalization. I'm gonna turn it over to Jeff right now, and he'll go over some of the numbers with you. Hey, Brian, thanks for the question. You know, I think when we look at the fourth quarter and the forecast for the full year, we have incorporated recent trends that we've seen in the marketplace to influence our guidance as we look out for fourth quarter and, you know, into 2022. It also reflects on an EBITDA basis the decisions that we've made as an organization to invest in the long-term health of the business by bringing on the right management team, the right people, the right systems for 2022 and the right resources to drive greenfield new store openings in the latter part of 2022. We've also had some timing of new store expenses that have influenced our guidance on the EBITDA basis as well. Those new store expenses for fairly large stores in the SoCal market will not be repeated when we get into smaller format stores like we talked about in the script today. That's very helpful. As a follow-up, Darren, just with regard to the these oversupply issues you've seen in the states you've mentioned. You've said that you view them as short-term transitory type of nature, but are you seeing anything right now to suggest that the pressures are abating, or are you looking more at kind of a history as a guide that they will abate? You know, we're looking more at the history back in 2018. As of now, we have not seen, you know, the slowdowns abate. I think 26% in California. One of the positives that we just opened two superstores in the L.A. markets that are performing well. So, you know, we are optimistic and it's happened before out west, and it'll continue to happen, Brian. As we spread this business out, you know, into 50 states, you'll see less seasonality, you know, out west. Right now we are concentrated. What you're seeing right now is in the fourth quarter of last year, we purchased nine garden centers out in California and Oregon. We're starting to see some of the pushback, you know, in the third and fourth quarters. The California markets, Northern California markets are extremely seasonal. We see that from the stores that we own. Now looking back into that second quarter when we start seeing, you know, the strength in the second quarter caught us by surprise and it's coming to bite us right now. You know, the one thing you're seeing from GrowGen, we're way above estimates for the year, both on a same store sales rate and also a revenue guidance rate, but you're seeing a little lumpiness. You know, the lumpiness as we get bigger and continue to grow, and we go into states will smooth out. Got it. That's helpful. I will turn the call over to the next person. Thank you. Thank you, Brian. The next- All right. The next question comes from Eric Des Lauriers of Craig-Hallum Capital Group. Great. Thanks. My question. Jeff, you called out percent mix of California and other states, which I really appreciate. Very helpful. Just wanted to check on what period those sales mix percentages refer to. Was that Q3 or more of a year-to-date figure? Just looking for some clarity there. Thanks. Yeah. Those are year to date numbers as we look at them. We try to give some guidance around the states without, you know, going into details by state. When we look at the state of California, it is, as Darren just mentioned, you know, an increased percentage. But as we build our new stores in 2022, in the Mid-Atlantic states of New Jersey, Pennsylvania, New York, New England, as well as some Midwest states such as Illinois, we will reduce our reliance on California and be more diversified in the portfolio. Yeah, certainly makes sense to me. I think prudent strategy there. Next question from me just on the ERP system. How long of a process do you guys expect that to take? And what kind of an increase in SG&A might we see as you guys implement that process? Thanks. The process will take this quarter and next quarter with some learning curve issues in second quarter. As far as the expenses that go into that, we will absorb those into SG&A. We have already absorbed some expenses associated with, you know, standing up that system, both from an SG&A and from a capital spending perspective into intangibles as well as some prepaids for licenses. The moving parts there are, you know, in the low single-digit millions. They will be absorbed by the company. We don't issue adjusted EBITDA excluding things like that. We just absorb those into our expense structure. We're looking forward to going live in the second quarter of 2022 with both NetSuite and Manhattan Associates offerings. The projects are going very well, and we anticipate that it'll help us with our internal controls around financial reporting, as well as improve our operational excellence initiatives in the stores. Great. We'll look forward to some of those improvements. Thanks. Thank you, Eric. Our next question comes from Andrew Carter of Stifel. Thanks. Good morning. You're laying out a pro forma of $475 and saying at least high teens growth for next year. What I want to understand, the M&A says it looks like it's about 8 points additional you'll get next year from what's not this year. Just wanted to get an understanding of your sensitivity in meeting kind of the underlying sales growth targets there in terms of opening the stores. I know you've said 15-20, but could you give us like an effective number of stores that are in your kind of base plan at this point? Thanks. Let me break down the 2022 communication that we gave in the script again for everybody. We said that in 2021 we'll do about $435 million-$440 million of total revenue on a GAAP basis. The 475 is a pro forma or a run rate number of what our revenue would have been had we owned all of those profit centers for the full year of 2022. Included in that $475 million is $35 million of e-commerce and $20 million of proprietary brands, leaving $420 million for all of the store operations, the commercial business, as well as the rest of the organization. We anticipate e-com growing 20%-30%, proprietary brands growing in the high teens. Overall, we anticipate growth in that, you know, 10%-20% without acquisitions, as a blended number when you incorporate in 15-20 stores that will open in the back half of the year, primarily Q3 and Q4. Those 15-20 stores, we have not signed leases, but we have identified markets that we are interested in going to. As we said, those are the big Mid-Atlantic states of Pennsylvania, New York, New Jersey, as well as increasing our position in Massachusetts. Entering into the Midwest states such as Illinois. We're excited about where 2022 can take us overall as an organization. We're excited about the opportunity to grow revenue in the back half of the year with greenfield locations. We'll generate a lot of cash next year. We'll use that cash to invest in new stores. We are not at this time talking about acquisitions for 2022. Those would obviously be accretive to these numbers that we're providing in 2022 if we find acquisitions that hurdle our investment criteria and add to our portfolio in an accretive way and make sense to us financially and operationally. Yeah, I get it. My question was how many effective new stores are in there next year? You're saying 15-20 today. In the stores this year, you had four, they got pushed out. Maybe it's different next year or whatever, that's what I'm asking about, what's built into plan effective number of stores. Thanks. 15-20 opening in the back half of the year. We anticipate those stores would generate $1 million-$2 million per store in calendar year 2022 on a GAAP basis. Okay, thanks. Second one to me is the inventory position. You're at 103 days. I appreciate the call-outs that were in the script, and I'll look at that again. Just kind of wondering as you kind of assess the overall inventory, what do you see any risk? This is a long shelf life product, but you know, can you give us a sense of are there any products that are deflationary right now where you do have some risk, and also how this longer inventory position could potentially support new stores next year? Thanks. Our inventory, as we discussed in the script, we've added inventory for acquisitions of around about $13 million since the beginning of this calendar year. We've added $13 million associated with inventory for our private labels products. We've added some prepaid assets to drive our label production, which has a long lead time and long supply chain. That's the usage of cash for this calendar year. You know, the products that we do have in our inventory actually, because as we actually look at it as a positive because it positions us to service our customers with a selection of products that are available to them even notwithstanding the supply chain challenges that the U.S. is facing. We have the product available for our customers, and a lot of that product was purchased before price increases from our vendors. We're able to capture both the investment returns as well as produce a better scenario for our customers. Pass it on. The next question comes from Mark Smith of Lake Street Capital Markets. Hey, guys. I just wanted to dig into the e-com business just a little bit. If you can discuss kind of the Agron business and how that's trending. We did see e-com kind of come down a little bit sequentially. Is that just, you know, a reflection of what's going on in the industry? You know, just give us a feeling for how you feel about that e-com business. Yeah, Mark, this is Michael. Right now it's actually trending up. I mean, we did $10.5 versus $3.9 for the quarter, trending to $35 million for the year. Really the initiative is to integrate Agron into our growgeneration.com portal so that the two websites are really now integrated. That's a big initiative that Becky Gebhardt, who just recently joined us, you know, from Lands' End and Crocs, is really leading. We see tremendous efficiencies in pricing consistencies as well as improving delivery and logistics. We see growth, you know, continuing in that 20%-30% range we've, you know, previously discussed. We actually see a tremendous upside in our e-commerce business creating these efficiencies. Okay. Just big picture, if you guys can just walk us through quickly, you know, strong goals for private label and kind of exclusive products. Just walk us through briefly, if you can, kind of the margin impact of kind of hitting those private label goals in 2023. Just like other retailers, our private label opportunity exists in the gross margin benefit that we get from selling products that we source and we bring into the stores directly. You know, clearly other retailers see margin improvement of 10%-20% on a percentage of revenue basis. We're looking at similar kind of numbers for our private label enterprise that we're building and we're focused on for the future. We are investing in SG&A because it does take you know, people processes and systems in order to drive the right allocation and the right inventory levels for private label. But net-net, that EBITDA margin flow through is very strong from bringing in private label and proprietary brands. We think that, you know, the growth from today's level of 8.7% for the third quarter to 25% will bring a meaningful impact to the margin basis of the business, as well as provide our customers with a good selection of products. Excellent. Thank you. Yeah, we can go to Aaron Grey of Alliance Global Partners. Hi, good morning, and thanks for the questions. I wanted to turn back to California for a second. Darren, I think you mentioned, you know, potentially, you know, some of the pricing pressure, you know, alleviating over there. We've had two MXOs, you know, talk about some pricing pressure maybe continuing for the next, you know, 12-18 months, you know, in the state. Just curious, you know. I know it might lead to some near-term pressure, you know, on your guys' side. You know, thinking more long-term and the opportunity, do you feel like it could put you guys in an advanced position because your competitors, you know, not being able to compete, there being some consolidation, you know, kind of a dynamic we saw a couple years ago within Colorado? Just curious as to your commentary, you know, if there is some, you know, prolonged, you know, pressure and supply-demand dynamics in California continuing, how you guys would be positioned versus the competition? Thank you. That's always a positive. Like anything else, we're in a better position than any one of our competitors to continuing to build out, you know, California and the rest of the country. As we see it, our concentration in California will be dropping as years go by, as we continue to build out the country. California will be, you know, probably go from 26%, you know, hopefully down to under 20% next year. The oversupply position, we look back to 2018. That's the only other, you know, time in the history of cannabis that you can look at. The oversupply position, you know, lasted, you know, a little over six months in California, you know, six months to a year. There is certainly nothing to define how long the oversupply position will take. What you do see during oversupply positions is people pull back on growing. Some people, you know, aren't building right now. On the other side of it, you're seeing a tremendous push towards legalization, as you saw from Nancy Mace the other day. Even though we don't believe it's imminent, we're certainly hoping for the interim elections in 2022, that we will see some sort of, you know, pushbacks from the Democrats and the Republicans and hopefully some middle ground towards it. California is the largest market in the country, and things usually do normalize out in California. We will continue to build the business out in L.A., and the California markets, but we are concentrating right now coming back east, which we believe will be a tremendously strong market next year. We're seeing a push towards homegrow rules in certain states and also homegrow rules adopted in Connecticut, Virginia, New Mexico, and also social equity rules. We believe next year will be a really bullish year for GrowGen as we roll out our ERP system and we continue to expand throughout the country. Okay, thanks for that color. That's helpful. Then just on your guys' private label initiative, I think you said about 20%, you know, by 2023. You know, just curious, in terms of the mix, in terms of opportunity for brick-and-mortar and then e-commerce, do you feel like there's more opportunity for you to increase, you know, that mix of private label, you know, at the e-commerce side or versus brick-and-mortar? Just kind of curious in terms of if you could give some detail of your current mix today of private label between the two channels. Thank you. Yeah, I'll start, and then I'll kick it over to Michael to talk about the vision for the product line. I think some interesting facts started to come together in the third quarter, where we are seeing a propensity of customers to come over to the e-commerce site as a percentage of our traffic, as well as an increased penetration of our credit cards in our stores, which does have a short-term impact on SG&A, but long term, improves our control systems by using credit cards in the stores. You know, we're seeing this trend toward you know, utilizing payment solutions, as well as migrating to the web, as we go through and mature as a business, and as an industry overall. Looking forward to that, and I'll kick it over to Michael to talk about the mix of products by channel in the future. I mean, Aaron, we're certainly moving our private label initiative from brick-and-mortar to online to see more margin expansion and also more awareness. You know, our online business generates over 2.5 million unique visitors, and that number is increasing. We're seeing tremendous adoption of our private label, you know, brands. We also see growth, you know, of our private label and proprietary brands, both internally within the GrowGen stores as well as outside as a growth initiative. As we mentioned, you know, Power Si, for example, is in over 500 locations across the United States as well as in an international in three international markets as well. You know, our initiative is working. Our Grow Pros have demonstrated an ability to present, you know, to our customers, and it's working. Yeah. The last thing I would add to Michael's comments is that we are also building out the distribution center on the backside of this. You know, when we look at the business going forward, utilizing the investments that we're making right now into systems, investments in 2022 into distribution center capabilities, we'll be able to service our customers through a network of regional distribution centers to service those customers with lower shipping costs for us as an entity. Looking forward to that coming online throughout 2022. All right, great. Thanks for the color, and I'll jump back into the queue. Thank you, Aaron. Our next question comes from Mike Grondahl of Northland Securities. Hey, thanks, guys. You know, you guys have done a bunch of acquisitions. You know, switching to the more greenfield new build strategy, I understand. How do we think about the potential for acquisitions going forward? Is it really low? Is it still, you know, just a small part of the strategy? Where's that pipeline? I guess, just a little bit more color there would be helpful. Yeah, Mike, I always think it'll be an important part of our growth strategy. We will continue looking for opportunistic acquisitions both next year and in the future. You know, right now, you know, we have nothing to tell Wall Street, but I do believe next year you will see some acquisitions from GrowGen, including greenfielding stores in new states. Next year, we will be greenfielding stores in Missouri, New Jersey, New York, Virginia, Connecticut, and Illinois, and hopefully Mississippi also. We have a pretty aggressive building strategy, but you will see tuck-in opportunistic acquisitions along the way next year, which will be accretive to our revenue and EBITDA guidance. The only thing I would also add to Darren is on the capital allocation decision-making process here in the company. We're spreading our capital allocation decisions across systems investments as well as greenfields. That doesn't mean that we're not going to do opportunistic acquisitions. We have plenty of capital and dry powder to do acquisitions as they present themselves to us in 2022 and incorporate those into our business. Got it. Just a quick one on the private label 25% in 2023 goal. You talked a little bit about the margin benefit and the channels, but if there's just, I'll say, two things that get you from 8.7% to 25%, what are those two actions you're taking to drive that? You know, I think the number one is to broaden the portfolio of brands, get a higher penetration of offerings across the portfolio of products that we offer. The second really is to increase the training in the stores and getting our Grow Pros throughout our network to understand the benefits of our private label and communicate those benefits to our customers. The third is to have available products for customers throughout our network and through our distribution centers, where you know, we can really service the customers with private label very efficiently and very quickly for their needs. You know, Mike, also, when you take a look at this year's growth in private label, you know, we came off about $2.5 million of sales in 2020. We were forecasting close to 10% this year, but the original forecast of 10% was off of about a $320 million run rate. When you take a hard look at the numbers we're coming in right now, you know, we're above that 10% on that $320 million of revenue we originally forecasted. They usually say, you know, the first growth is usually the hardest growth. We've taken a $2.5 million sales division and, you know, a private label and brought it up to almost $35 million this year. We're going in the right direction. This has been during extremely hard times with supply chain, getting containers in from China and India. We've had some very long lead times on products that are still coming in, that we're starting to get a better cadence on the ordering and really the time frames of getting these products in from China. As you're seeing throughout the year, our private label brands have been increasing quarter-over-quarter, and we see that continuing through next year in 2023 and into the future. Great. Thanks for the color. We can now go to Scott Fortune of Roth Capital Partners. Good morning, and thank you for the question. Just to kind of follow up on that one last thing on the private label side. You mentioned mix. Are there categories that you're putting priorities on, like the nutrients side or the recurring side, equipment? Kind of, can you provide a little more color on the category kind of focus to ramp up your private label sides? Then a follow-on question after that. Yeah, Scott, I mean, it's really across the board. Nutrients, additives, you know, lighting, you know, the high-velocity products that our customers are demanding. We're investing in research and development and bringing the best of breed, you know, products at the best price. Our ability to educate. This is a knowledge-based sales process with our Grow Pros. That gives us an advantage. We have the ability to not only develop product and we see the trends in the market because of our number of stores and, you know, we're servicing hundreds of thousands of customers. You know, we're hearing what those customers want, what the growers want. We're able to take that data and convert it into a product development strategy, which is really working. It's really a broad-based approach from the private label side in terms of product. Got it. I appreciate that. Real quickly, Darren, you mentioned kind of the home grows and more the do-it-yourself hobbyist. As these new states come on board, you know, we think this could be a, you know, very nice, almost like the craft beer industry, right? Where hobbyists are really coming on board into this space. You haven't mentioned them, and obviously the commercial side's been growing. It seems like online and private label would really drive more meaningful revenues to that space or the do-it-yourself kind of obvious side. Talk to us what percent comes from that demographic and your online initiatives to kind of target more of that demographic with higher margin products potentially. Yes. It's got the home grow rules excite GrowGen, as do the social equity rules that you're starting to see rolled out. The more growers, you know, really the better the business for GrowGen. What excites us, you know, in addition to the whole rules is also vertical gardening. GrowGen is starting to make a push into the vertical and urban gardening markets also. When you come to our stores, we teach you to grow a plant, whether it's a cannabis plant, whether it's fruits, vegetables, or lettuce. Even though 90% of our business right now is into the cannabis industry, we see a tremendous opportunity on the vertical gardening side of it, the home grow side of it. You know, right now you're looking at revenues of about $35 million online, so you're talking probably about 8% of revenue coming from our online business. We do believe through home grow rules and more people growing that our online sites will continue tremendous growth into the future, as you'll see growth coming out of our stores. We also, when we look at margin comparisons between, you know, our larger customers, our MSOs, and our smaller home growers, we're making more money on the home growers. They're spending more time in our stores, and they require more learning from our Grow Pros. The one thing like where we always believe the stores will play such an important part, while they're the crown jewel of GrowGen, and they will continue to be as we spread out in 2023 over 100 stores, is the learning aspect that an individual grower, a new grow can come into a store and learn how to grow both a cannabis plant and a tomato plant. We do believe with home grow rules, people will be growing both in their backyards. About a year ago, we went through customer segmentation, and we've learned from customer segmentation and the polling of customers around the country that growers grow. Whether they're growing a cannabis plant or fruits, vegetables, or lettuce, they love to grow. We do believe that the other side of our business will continue to pick up as home grow rules continue to ramp across the states. Okay. That's it for me. Thanks for the color, Darren. Appreciate it. Thanks, Scott. Now we can go to Glenn Mattson of Ladenburg Thalmann. Hi. Thanks for the question. Curious about the, as you go into the newer markets in the East Coast and Mid-Atlantic and, I guess a little bit in the Midwest, if there's anything different in the competitive landscape that you see, like in New Jersey, some of these markets, New York. These are obviously new markets, so there's probably little in terms of existing competition. But in places like Illinois and Pennsylvania, they're a little bit more established. Curious if there's anything different than what you've seen historically, but then also does your relationships with MSOs, does that, you know, a lot of those people are opening stores in these. They're opening cultivation in these states and things, so does that give you an early advantage as they move into the Northeast in particular, versus whatever- Mm-hmm What competition is out there? Thanks. Yeah. Yeah, Glenn, we currently transact business in most states where the MSOs are located and the large single state operators, so it certainly does give us an advantage. When you look at the competitive landscape in new states, Pennsylvania, whether it's New York, New Jersey, there's very little competition in those states. What GrowGen will be doing, as we stated earlier, we'll be opening smaller stores with distribution centers, which will bring down the cost of opening these stores and really bring up the profitability. There is very little competition back on the East Coast and certainly the Mid-Atlantic states that we will be going into. We look at quicker ramps in these states, especially the states with home grow rules. Great. Thanks. One last one, if I could squeeze in. Just, maybe you mentioned it and I missed, but, can you talk about any issues in the next, say, six months with supply chain, if there's any new issues or if you see that kind of subsiding over time? With that, maybe a little bit on commodity cost pressure and your ability to pass that on. Thanks. As far as the supply chain and the commodity cost increases, you know, there's nothing really new to report there. We're still dealing with the same issues as the rest of the country on both sides of that. You know, we do think that our investments in the inventory will help mitigate some of the reliance on just-in-time delivery of products, as well as mitigate some of the impact of price increases for the short term for us as a company. Ladies and gentlemen, that concludes the question and answer session. I would now like to turn the call back to Darren Lampert for any additional or closing remarks. I'd like to start by thanking each and every one of our veterans and our military for everything they do every day to keep our country safe. I'd like to thank each and every one of our employees and shareholders and wish everyone a happy and healthy holiday season. We look forward to sharing-