Hello and welcome to GrowGeneration's fourth quarter and full year 2022 earnings conference call. My name is JP, and I'll be coordinating your call today. Following the prepared remarks, we will open the call to questions from analysts with instructions to be given at that time. I'll now hand the call over to Clay Crumbliss with ICR. Welcome everyone to the GrowGeneration fourth quarter and full year 2022 earnings results conference call. Today's call is being recorded. With us today are Darren Lampert, Co-Founder and Chief Executive Officer, and Greg Sanders, Chief Financial Officer of GrowGeneration Corp. You should have access to the company's fourth quarter earnings press release issued after the market closed today. This information is available on the investor relations section of GrowGeneration's website at ir.growgeneration.com. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. 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 forward-looking statements made today. During the call, we'll use some non-GAAP financial measures as we describe business performance. The SEC filings 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. Following our prepared remarks, we will take questions from research analysts. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, please reenter the queue, and we'll take them as time allows. Now, I will turn the call over to our Co-Founder and CEO, Darren Lampert. Thank you, Clay. Good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2022 financial results and our full year 2023 guidance. As always, I wanna thank each one of our employees across our company for your continued support of GrowGen. The last year has been extremely challenging. I, along with the rest of the executive team, appreciate your continued hard work and dedication to our vision and strategic plan. Regardless of the market challenges throughout the year, and really over the last three years since we entered the pandemic, the team has been steadfast in executing our business model. I commend our entire team for stepping up to every challenge that has come at us over this time period. We are pleased that our full year 2022 net revenue, $278 million, was in line with our previously communicated guidance range. We are also encouraged that our efforts in 2022, the right size of the business are starting to show in our financial results. We are optimistic that the work we're doing is putting GrowGen in a significantly better position going into 2023. Further, for the first time in seven quarters, we believe GrowGen will see sequential revenue growth in Q1 2023 versus Q4 2022. In addition, we believe that gross margins will normalize in the mid-to-high twenties beginning in Q1 of 2023. In 2022, we invested in our stores, product portfolio, supply chain, technology, and other strategic initiatives as part of our long-term strategy to enhance profitability. In the fourth quarter, we added three members of senior management from the hydroponics industry in the areas of commercial sales, supply chain, and product development. We also have significantly increased our volume of our private label products driven by our Drip Hydro and Char Coir brands. Private label accounted for $26 million for retail and e-commerce sales in full year 2022, which is around 12% of our overall retail and e-commerce sales, growing 6% year-over-year as a percent of sales. Our team also continued to make advancements in our supply chain through the expansion of our distribution centers and fulfillment hubs, which now total eight locations with our newest center in Columbus, Ohio, expected to be operational before summer. With that as the backdrop, our day-to-day strategy is generally the same since we last spoke. We remain hyper-focused on controlling costs and generating cash, and we made significant progress in 2022. While some of these efforts have come at the short-term expense of our gross margin, especially in the fourth quarter, we firmly believe these decisions are putting GrowGen in a better place to be stronger and more nimble than ever before. It's important to reiterate that GrowGen remains on solid financial footing. We have a strong balance sheet, and we don't anticipate the need for external debt or equity issuance. We ended the 2022 fiscal year with $72 million of cash and cash equivalents and marketable securities and no debt on our balance sheet, representing a sequential increase of $1 million in our net cash position since the end of the third quarter of 2022. This marks the second consecutive quarter that we have grown our cash balance despite the incredibly challenging industry conditions. I'd like to provide a brief overview on some of our key business initiatives throughout 2022, how we see those going forward in 2023. We recognized the need early last year to focus our organization on cost control, store consolidation, inventory reduction, and cash generation. In 2022, we reduced inventory by $28 million compared to the end of 2021, including a sequential $12 million reduction in the fourth quarter from the end of the third quarter. These inventory reductions have generally occurred at discounted prices, which clearly pressured our gross margins in 2022. We believe it was the prudent thing to do as we optimized our working capital base and prioritized cash generation and balance sheet preservation. Partially offsetting the negative impact of our gross margin contraction, we made significant progress rightsizing our expense structure in 2022. We made the difficult decision to reduce our payroll base by a total of $12 million throughout 2022. In terms of our store footprint, we made considerable progress eliminating market redundancies and overlaps by closing eight stores in total for 2022. We also continued to expand into markets where we see long-term value, opening five new stores and included four new states where we didn't previously have retail operations. These new locations, including Virginia and New Jersey stores, are branded as GrowGeneration Hydroponics and Garden Center, which we think represents an opportunity to provide a broader in-store product assortment that should allow us to increase store traffic and productivity by attracting new customers. We reduced our store count by three stores and ended the year on December 31st with 59 locations in operation. We expect these initiatives in 2022 to continue benefiting our company well into 2023, including cost savings flow-through from store consolidation, reduced payroll expenses, improved shipping costs from declining ocean freight rates, reduced headwinds from inventory discounting on our margins, and a greater percentage of private label sales. This will all have a positive impact on Adjusted EBITDA generation and margins. Going forward, we expect to continue seeking out acquisitions in white space markets where we think it makes sense. We will also continue product development around our key brands and private label offerings. We're focused on monetization of our 1 million sq ft of retail space, including merchandising and product education with key partners, and a laser focus on execution of the various business transformation initiatives centered around supply chain and enhancing our customer journey. GrowGen is a unique, highly differentiated retailer. We are the leader in a large, fragmented market. Our customers have a passion for a grow pro lifestyle. GrowGen is more than just a retailer. We are a developer of market-leading brands and private label products. We are a distributor supporting the entire hydroponic growing community. We are above all a passionate and dedicated partner to our customers. We live our mission and values. Our culture defines our relationship with our customers. We'll be celebrating our tenth anniversary in a year. As we begin the new year ahead, we take great pride in our past. We're equally excited about our future. Turning to guidance for full year 2023, we expect net revenue in the range of $250 million-$270 million, translating into Adjusted EBITDA in the range of a $4 million loss to a $1 million profit. As part of that, in the first quarter of 2023, we expect net revenue in the range of $55 million-$57 million, translating into Adjusted EBITDA in the range of a $2 million loss to a $4 million loss. With that, I will turn the call over to our CFO, Greg Sanders. Thank you, Darren. Good afternoon, everyone. First, I will address our fourth quarter and full year 2022 financial results. Then I will discuss our preliminary outlook for the 2023 fiscal year. Starting with our fourth quarter results, GrowGeneration generated revenue of $54.5 million versus $90.6 million in the fourth quarter of 2021, representing a decline of approximately 40%. Our same-store sales for the fourth quarter 2022 were $34.3 million compared to prior year sales of $71.4 million, representing a 51.9% decline against the comparable year-ago quarter. Our e-commerce revenue declined on a comparable base from $7.7 million to $3 million. Our distribution and other revenue was $13.5 million for the quarter report compared to $4.6 million in the year ago period. Representing an improvement of 195%. Gross profit margin was 17.6% for the fourth quarter of 2022, down approximately 830 basis points sequentially from the third quarter of 2022. Gross profit dollar generation in the fourth quarter decreased 7.9% from the prior year, which includes the addition of gross profit from acquisitions of HRG, MMI, and St. Louis Hydro in the trailing 12 months. The company sold over $12 million of overstocked and aged inventory in Q4 clearance events that we estimate resulted in a total gross margin degradation of 332 basis points. Further, the company increased its inventory reserves by over $2 million in the quarter, which had a 379 basis point impact. The combination of these two strategic initiatives resulted in a one-time margin reduction of 7.1%. Our Q4 strategic initiatives to further right-size the inventory of the business are largely complete as of December 31, 2022, and better position the company as we move into 2023. Store operating costs and other operational expenses declined sequentially from the third quarter. Overall, store operating expense declined from $14.5 million in Q1 to $13.8 million in Q2 to $13.6 million in Q3, finally to $12.8 million in Q4. The savings recognized throughout 2022 were primarily attributed to payroll reductions. We anticipate further cost decreases to continue into 2023, resulting from the execution of store consolidations in the latter half of 2022. Selling, general and administrative, or SG&A costs were $8.6 million in the fourth quarter, of which $1 million was derived from stock-based compensation. This compares to $8.8 million in the third quarter, with $1.3 million of stock-based compensation. This represents a 2.3% improvement quarter-over-quarter to SG&A. Depreciation and amortization of intangibles was $4 million in the fourth quarter of 2022, compared to $4.1 million in the year ago period. Compared to the fourth quarter last year, SG&A expense decreased $2.8 million in the same period of 2022, with overall savings driven from payroll reductions and increased cost controls over a broad range of categories. Income tax in the fourth quarter was a benefit of $248,000 for tax purposes, but with a full valuation allowance, we did not observe a significant income tax provision benefit or expense in the period. Net loss for the fourth quarter was $15 million or -$0.25 per share, compared to a net loss of $4.1 million or -$0.07 per share for the comparable year ago quarter. Adjusted EBITDA, which excludes interest, taxes, depreciation, amortization, and share-based compensation, was a loss of $10.2 million for the fourth quarter of 2022, compared to a loss of $1.7 million in the fourth quarter of 2021. We estimate this quarter's Adjusted EBITDA loss includes roughly $1 million in expense associated with the closure and consolidation of our Las Vegas, Compton, and Cotati locations, and nearly $4 million associated with the inventory cleanup measures taken in the fourth quarter. These areas of execution were strategic initiatives taken to position the company for 2023. Cash generated from operations in the quarter was $2.6 million, primarily attributed to the reduction in inventory and additional measures taken to strengthen the balance sheet. I will provide a quick overview of our results for the full year 2022. Net sales were down $144 million, or 34%, $278 million from $422 million in the full year 2021. Gross profit for the full year 2022 decreased by $48 million to $70.2 million, and gross profit margin was 25.3% in 2022 compared to 28% in the full year 2021. As Darren mentioned earlier, we have taken a number of steps throughout the year to right-size operating expenses and reduce our SG&A based by roughly $20.7 million through operational rationalization, workforce reduction, and tighter day-to-day expense controls. Related to the balance sheet, as of December 31st, 2022, the company had total cash equivalents, and marketable securities of $71.9 million. Within working capital, the company reduced inventory by $28.4 million, partially offset by a $2.6 million increase in high creditworthy accounts receivable. We also invested approximately $9 million for payments associated with technology and distribution investments. On a full year basis, the company generated $12.5 million in cash from operating activities, primarily driven by the reduction of inventory and prepaid accounts payable. I will now discuss our guidance for the full year 2023. We expect full year 2023 revenue to be between $250 million and $270 million, full year Adjusted EBITDA to be in the range of a $4 million loss to a positive $1 million profit. Our updated guidance assumes quarter-over-quarter improvements in Q1 of 2023, and further revenue and profitability improvements continuing into the second and third quarters of 2023. The improvement in Adjusted EBITDA expectations is primarily driven from the execution of our 2022 reductions to payroll, our eight store closures, and our inventory optimization efforts. We expect gross margins to normalize into the mid to high twenties in the first quarter of 2023. On a comparative basis to the fourth quarter, management expects modest improvements in revenue in Q1 of 2023, which would be the first quarter-over-quarter improvement to revenue since the second quarter of 2021. We expect operating expenses to be controlled and sequentially down in the first quarter as we recognize additional cost improvements from our strategic initiatives. We are positioning the company and executing our business strategy to focus on cash from operations and EBITDA improvements. As we mentioned earlier, we expect that our headcount reductions are largely complete and the heavy lifting to correct our inventory position was mostly concluded in the last two quarters of 2022. With that, I will turn the call back over to Darren for closing remarks. Thank you, Greg. Before we open the line for your questions, I want to reiterate that while 2022 was a challenging year for everyone in the cannabis value chain, GrowGen remains focused on the areas of the business that we can control. We continue to make strong gains against our priorities, drive cost control, consolidate stores, reduce inventories, and improve profitability while preparing to capture the many growth opportunities that lie ahead, all of which we expect to drive incremental benefits in 2023. We remain committed to the expansion of our proprietary and distributed brands. We are very satisfied with the results of our private label products, including Char Coir and Drip Hydro. The addition of MMI strengthens our position to gain indoor vertical cultivation projects with their leading benching and racking systems. Controlled environmental agriculture and sustainable ag are only in the development stage. We believe that more companies will invest in sustainable indoor vertical farms for local production of leafy greens, tomatoes, fruits, and other food products. To close, while we expect a degree of continued uncertainty in 2023, we are not planning for an imminent turn in the cannabis cycle, we remain nimble and well-prepared for a turnaround when it happens. Thanks to proactive management of the business in 2022, we believe GrowGen is on solid financial footing with a solid balance sheet, healthy liquidity, and a solid cash position. Thank you for your time today. Thank you for your interest in GrowGeneration. We will now take your questions. Operator. Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star followed by one on your touch tone phone. You will hear a one-tone prompt acknowledging your request. Your first question comes from the line of Mark Smith from Lake Street Capital. Your line is now open. Hi, guys. First question is really around inventory. You did a good job getting those levels down, but it sounds like you had to clear some stuff out to kind of get there. Can you just talk about, you know, your comfort with inventory levels today, you know, and do you still have, you know, any inventory that you think still needs to maybe be cleared out here in 2023? Hey, Mark. This is Greg. You know, we reduced inventory $28 million in the year, $22 million in the last two quarters of the year. At this point in time, we're carrying $77 million in inventory as we concluded the year. We believe that the volume of inventory that we have is appropriate for the business on a forward-looking basis. Our inventory isn't completely perfect, but we think it's in a very good position at this point with all of the efforts that we've taken, primarily over the last two quarters. We don't expect any major changes in our inventory volume as we move forward. Excellent. Then just following up on that, can you talk a little bit about kind of the mix of consumables versus more kind of capital equipment? You know, and Darren, at the end, you talked a little bit about, you know, we're maybe not, you know, seeing improvement yet in the industry. You know, are you seeing signs of that and, you know, your guidance for the year, does that include, you know, the beginning of more build-outs of kind of new growth facilities? Yeah, Mark, I'll start at the beginning. When you look at the mix of our inventory right now, we've moved through a tremendous amount of non-consumable inventory in 2022. When you look at the tremendous reduction, you're really looking at the lighting side, the DE side, and the products that we use in build-outs. You know, we've kept our inventory up on the consumable side. Those are products that our customers need on a weekly, daily basis. We've kept that to a point where we're very comfortable. When you unpack, you know, the second parts of the question, you know, we have been grinding around the bottom for the last, you know, probably for the last three to four months. March is the first month that we are starting to see some upticks. We're starting to see more bidding out there on commercial products back east. We are seeing stabilization. You know, we have consolidated some of our stores around the country. We consolidated eight of our stores, and we feel that we're in a very good position right now going into 2023. We're seeing stabilization on pricing, on cannabis out in California. That's what we're hearing from our customers. We're also, you know, we're also hearing out in the California markets that you are seeing, starting to see, you know, the large amounts of supply starting to dwindle. We're keeping a, you know, an eye on the outdoor season right now that's coming up in April, but we have seen a little stabilization in our business. Excellent. Good to hear. Thank you. Your next question comes from the line of Brian Nagel from Oppenheimer. Your line's now open. Hey, guys. Good afternoon. My first question, and this is basically the follow-up on that, the question, the prior question, just with respect to the, you know, the overall industry. Darren, you're saying here you're seeing we've been kind of grinding along the bottom and maybe seeing some signs of stabilization here. As you look, and I know this, you know, we've been talking about the factors that have weighed upon the industry now for a while, you know, oversupply, maybe slower licensing. Is it becoming clearer, you know, whether those factors we discussed were more transitory in nature, or has there been a, sort of say, a reset lower, you know, in the underlying growth potential from an industry perspective within the space? Yeah, Brian, my belief is that on a go-forward basis, you will see much slower growth in the hydroponic and cannabis industries. I think the hypergrowth, the 20% year-over-year compounded growth that people are expecting through the twenties, I don't believe that to be true any longer. I think what you're seeing right now is an industry that has tremendous potential. I do believe that you will see slower growth in this industry. You'll see tremendous consolidation in this industry. I do believe that what you've seen over the last 20 months, you know, there was many reasons for it coming out of COVID. There was a tremendous amount of capital coming into the cannabis industry that has slowed in the last 20 months. Like most industries in the early stages, you do run into these issues. I think what you're seeing right now is inventories coming down, both on the cannabis side of it, but also more importantly on the hydroponic side of it. There was a tremendous amount of hydroponic equipment that was brought into this market, to fuel the build-outs and the feverish, you know, build-out that you've seen. That has slowed to a much more normalized base. Forecasting is going to become much easier for GrowGen as we build out our distribution centers. We believe that you will see growth in this industry, but I think the hypergrowth that people thought you will not see in the future. That's really helpful. I guess to follow up on that, as you look at some of the new markets and where you've seen, you know, I guess legalization and then subsequent licensing, you know, particularly East, how would you characterize that initial build-out in those markets versus what you saw in some like the Michigans or Oklahomas? You're seeing a much slower ramp back East in Virginia markets. It's taken an enormous amount of time, you know, to get regulations passed, but it's also taken an enormous amount of time to get properties built. One of the issues that you're seeing, Brian, is, you know, with the slowdown in the Oklahoma markets and, you know, the Michigan markets and the California markets, the capital has dried up. With the dry up of capital, you're seeing much less building and you're not seeing the race to the start, which you've seen years ago. You're seeing a much more controlled build out environment. I do believe that you will that's what you will see in the future. We're seeing that in the stores that we've opened. You know, we opened five new stores in four states last year, Virginia, New Jersey, Missouri and Mississippi. We're seeing, you know, we were seeing stores go profitable first month into builds, and we're not seeing that right now. You know, albeit we are seeing ramps in all our stores that we've built, but not the ramps that we've seen back in 2018, 2019 and 2020. Got it. Just one more, if I could flip it back, just more specific to your business. You know, you closed a number of stores. As you look at the base now, are there, will there be additional closures or is it basically cleaned out and poised to grow from here? A follow-up to that, in the stores you closed, I assume that those were acquired stores, not stores that GrowGen opened organically, correct? That is correct, Brian. On the other side of that, we still do believe you will see a few more store closures from GrowGen this year, but not anywhere near the pace of last year. You know, we're targeting anywhere from one to four store closures this year. Just so you do know, most of our store closures come when leases are up and we're not renewing leases. You know, the costs have been, you know, pretty tame for store closings. We have kept, you know, a good portion of business, but not as much as we would have liked from these store closures. Got it. I appreciate all the color. Thanks, sir. Thank you, Brian. Your next question comes from the line of Chris Terry from Wells Fargo. Your line is now open. Hey, guys. Why do you expect revenue to increase quarter-over-quarter? Are you seeing something? Can you expand on March? I think you highlighted that. Secondly, you know, this acquisition you did, is that material? The acquisition that we've done in March was not material. They're very small acquisitions. We are seeing a little pickup in business in March, you know, over fourth quarter of last year. We are going into our seasonally strongest period, which is the second and third quarters. What we're hearing from our commercial team, our store team, and our customers is, you know, that business is starting to pick up, and we're starting to see it in our consumable side of it, and we are starting to see much more quoting on the commercial side of it back east and in new markets. Okay. This is what you're seeing, not necessarily what you're projecting. Just confirm. It's what we are- Well, you are projecting, but you're seeing this currently is the point. Yeah, Chris, I'll jump in as well here. You know, one of the key reports that we use, you know, on a daily basis is our daily sales report. We've seen, you know, revenue pick up across the country in Q1 on a comparative basis in our retail markets. That's part of the optimism that we have around the Q1 numbers and an improvement in the first quarter, you know, sales in comparison to Q4. Okay, great. That makes total sense. Just on, you know, the daily sales comment that you just made, are you seeing daily sales stabilize and start to pick back up? Is that what you're kind of referring to with the daily sales on a comparative basis? Yeah, exactly. We are seeing improvement in Q1 versus last quarter. Okay, got it. Just the final question is, you know, if you could put it all together, you know, why you think this is happening. Is it just because, you know, at some point the market has to bottom and stabilize? You know, you highlighted, you know, pricing seems to be normalizing, you know, inventory seems to be normalizing. Is this like, do you have any theories about why this is happening just in aggregate with information? You know, Chris, we're 20 months into a downturn, into a market that, you know, we still do believe, like many has tremendous potential. 20 months is a long downturn for any cycle. We are starting to see, you know, a pickup in business in March and, you know, as we saw in the last couple months. We're starting to feel a little better about the industry. When you start taking a look and talking with our customers, and we have thousands of them, they're starting to see price stability in the California markets to increasing pricing. They're starting to see some of the illegal growers have gone out of business. You know, we're hearing up to 15% of the market in California has closed. You're seeing, you know, smaller base of growers out there, which brings down, as you probably know, supply on the cannabis side of it. We are starting to see that. We've also seen the same in Michigan. We've seen closures in Michigan. With that, you're gonna see strengthening from the individuals that are still in business. One thing that we haven't seen as of yet, you're not seeing money come back into the markets. We have been extremely diligent on lending money to customers ours as we continue to keep our balance sheet, you know, in tremendously good condition. We do see right now, as our side of the industry consolidates, we see tremendous acquisitions out there. We do believe that, you know, you will see some at GrowGen this year. We don't think there'll be any material acquisitions this year. There'll be some smaller ones filling in white space around the country. We will keep Wall Street and you posted on those. Okay, sounds good. Good luck. Your next question comes from the line of Eric Des Lauriers from Craig-Hallum Capital Group. Your line is now open. Great. Thank you for taking my questions, and congrats on the strong balance sheet management here. Pretty impressive. My question is kind of following up on some of these trends that you're seeing, and if I'm understanding correctly, you're seeing, you know, sort of continued weakness in the more durable CapEx products in your business, but seeing, you know, overall, I guess, consumable stabilization or maybe even quarter-over-quarter growth in consumables in Q1. My question is, what, in terms of same-store sales growth, your guidance assumes, I guess mostly with respect to consumables. I mean, are you expecting to see sort of year-over-year growth kinda starting sometime midpoint in the year? I guess if you could just sort of flesh out what your guidance implies from a same-store sales perspective, and then I guess maybe any color between, you know, durables and consumables within that would be great. Thanks. You know, to start with, Eric, we don't break down, you know, the future of both consumables and non-consumables. You know, consumables is our everyday business. That's what we guide to. We also do guide to some non-consumable build-out projects, which we saw very little of in 2022. When you look at guidance right now, for 2023, it embeds, you know, three different divisions of GrowGen. We do believe we will see growth in our online division this year, versus last year. We also do believe you'll see growth in our commercial division year-over-year, and we do believe you'll see growth in our underlying stores, you know, starting in the 2nd quarter of this year. We're still going against some decent comps out of January, you know, out of the first part of last year, which really slows down going into the second quarter of 2022. We do believe you'll see a steady rise in decreasing same-store sales. You know, we still do hope that you will see a positive same-store sales number from GrowGen going into the latter part of this year. At this point, it's just too early to forecast that. If you look at our forecasts for 2023, we're forecasting increased sales going into the second and third quarter coming off guidance, what you're seeing at that $55 million-$57 million mark in the first quarter. You will see, you know, continued increases, both on an EBITDA basis and also on a sales basis going into the second and third quarters. That actually segues nicely into my second question here. You know, obviously you guys have talked about guidance kind of assuming a quarter-over-quarter increase in revenues in EBITDA. Wondering if that does extend from sort of Q3 into Q4, you know, in other words, if you're not expecting to see the sort of normal Q4 seasonality that you have in the past? If not, could you just kind of expand on perhaps why you do not expect to see that seasonality this year? I guess it's just kind of a final one, does your guidance assume any contribution from this M&A that you've said is potentially likely in this year? Yeah, Eric, right now, none of our guidance. I mean, our guidance does include any M&A we're doing this year. We also will have a few store closures this year, basically we look at that as kind of a zero-out sum. If we do any material acquisitions, which we are not expecting right now, you know, that is not filtered into guidance. When it comes to the fourth quarter of this year, it's just too early to really forecast on that. The one thing we feel comfortable with, that our fourth quarter same-store sales and sales number will be higher than what you're seeing in the fourth quarter of 2022. We are, again, right now, a little hard to see if we'll see, you know, we'll seek, quarter-over-quarter growth in the fourth quarter versus the second and the third. Okay. That's very helpful. Thank you. Your next question comes from the line of Aaron Grey from Alliance Global Partners. Your line is now open. Hey, good evening, guys, and thank you for the questions. First one for me, just wanna dive a little bit deeper into California. Thanks for some of the remarks that you've had, Darren. We've seen a number of active cultivators kind of come down meaningfully as they opted not to renew over the past six months or so, you know, down to about 1,200 or so. I wanted to ask if you had any insight in terms of the outlook on that. It looks like there are a lot more renewals coming up in the next six months. We talked about some stabilization of pricing in the state. Do you think there's could still be some more trimming of the number of active cultivation licenses, or do you think that has stabilized as people are seeing, some more stabilization within the pricing? Thank you. You know, again, it's a very difficult question, Aaron. I think a lot of it has to do with financing and really the state of some of the balance sheets of some of these California growers. I think we all know that California is the epicenter of cannabis and always will be. I think it's that delicate balance between the legal and illegal markets that you're seeing right now. With companies taking a very hard look at their operations right now, their balance sheets and their income statements, you know, some of the larger companies that aren't making money in California have made that decision right now that they'd rather look a couple years down the road as opposed to just standing right now, just, you know, difficult margins and a difficult sales environment in California. You know, we are seeing some of our California stores, you know, outperforming right now. Our downtown L.A. store has been growing. Our Santa Rosa store right now is starting to grow again also. You know, we have seen, you know, when you look at California, much more trouble in the outdoor markets in California. Something that we're keeping a very close eye on going into the spring this year. You know, we'll make some decisions, you know, after we see, you know, some of our stores that are very second and third quarter oriented. Okay. All right. Great. That was really helpful. Second question for me is just on private label. In case I miss it, could you give me target you might have for this year in terms of private label, and then how that might impact you guys reaching the higher low end of the mid to high 20s gross margin guidance? Thank you. You know, as we said earlier, our private label penetration in our stores online was up from 6% to 12% of sales this year. You know, we believe that will continue into 2023. One of the interesting parts, we launched Drip Hydro in the summer of 2022. You'll have a full year of growth on Drip Hydro, which is, we believe, one of the fastest growing, if not the fastest growing nutrient line in the country right now. We have extremely high hopes for that. We're also doing line extensions on Drip and Power Si. You see some new products coming out of these brands that we're very excited about. The same thing with Char Coir. You know, the biggest issue we had with Char Coir a couple of years ago was really pricing coming in from India on freight. We're seeing freight pricing come down, you know, probably 70% in the last year. Char Coir, which we believe is the premium brand in the market right now on the coco side, is becoming much more competitive on pricing, and we're starting to see a tremendous ramp in our Char Coir brand right now. We are coming out with new products continually right now. We just brought in a extremely talented individual on the R&D side of it. That's going to help our private label penetration in 23 in the future. Again, we do expect a nice bump. The number, we're not sure right now, but we will keep you posted on a quarter-over-quarter basis. Okay, great. Thank you very much for the call, and I'll jump back in the queue. Your next question comes from the line of Scott Fortune from Roth MKM. Your line is now open. Good afternoon. Thanks for the question. Appreciate all the color on the pricing kind of overall for the industry, but can you focus a little bit more on your ability to continue, you know, whether it's being the price leader in your markets or continuing to kind of give us a little color on the pricing with the input cost that's going on. What's the competitive landscape now? Yeah, I'm sure there's a lot of pressure from the competitors on your side and potential pricing pressure there. Just kind of sense for the pricing within your own stores and that ability right now. You know, I think, Scott, what you're seeing is similar to the, you know, our underlying business, which is the cannabis space. There was an abundance of oversupply on the product side. With this tremendous slowdown in our industry, and when you look at GrowGeneration, you know, our same-store sales were down 51% last year. I think it was quite a feat when same-store sales were down 51% and, you know, you cut inventory $28 million. We did a tremendous job moving through inventory SKU rationalization, and I think you're seeing that around the country right now. On the other side, we're seeing many store closures out there, as you're seeing on the cannabis side of it. You know, when industries usually hit bottom, you see consolidation, and we're starting to see that right now. Again, pricing at GrowGen has been pretty normalized this year if you were to take out the tremendous amount of discounting we did on SKU rationalization, and certain SKUs that we needed to bring down. It was really on the non-consumable side of it that GrowGen, along with many companies, you know, brought levels up when shipping was so difficult coming out of China back, you know, back during COVID. Many products came in, you know, three to six months later and kind of came in at that downturn of the market. I think you heard similar comments from Bill Toler over at Hydrofarm the other day, and I think you also heard it from Hawthorne. As we all work through inventory, you know, we believe pricing will normalize. But when you look at GrowGen, our private label products and some of our higher margin products have been doing a tremendous job really masking the tremendous degradation in margins that you're seeing on our sale products to bring inventory down the way we did. I appreciate that. Then Darren, you know, you've been through a few cycles here, and we understand the CapEx equipment side, right? That spend obviously is down, and there's very limited capital or production capacity being added here. The, you know, outside of the new states, obviously that those build-outs will continue. Help us understand, you know, at some point there's going to be a refresh cycle, right, for a lot of the spend that's going on. A lot of the operators are looking to become more efficient operating on their production side of things. How do you look at kind of the CapEx spend, and then what happens with? Is there an aftermarket for a lot of these equipments like lights and such that you guys can see some growth from? Just kinda step us through that, the refresh cycle. Probably not factoring much in there, but the potential there. Yeah. We believe you will see a refresh cycle, you know, coming up maybe not this year, but maybe the following year. I mean, you still are seeing facilities that are using double-ended bulbs and fixtures opposed to LEDs. Again, it's all a matter of capital, Scott. You know, Wall Street is shut down, you know, the cannabis space and, you know, I do believe, you know, you will see a resurgence. You're starting to even see right now, you know, certain comments that they may be opening up the Toronto Exchange up in Canada to get some more liquidity and capital into these companies. You know, there's a lot of ifs. You know, the one thing that we do know when we look into our 2022 sales, you know, the biggest degradation in sales that we saw was on the capital equipment side. We've been pretty vocal about that. We feel tremendously comfortable with the other side of our business. That's the higher margin side of the business. Where we stand right now, you know, with our private label products coming out and, you know, with Drip Hydro, Char Coir, and some of the other brands that we're launching into the markets, you know, we believe that our margin profile will be very advantageous going forward into the future. We have stayed away from selling used equipment from GrowGen. We've stayed away from the junkyard. It's just not in our business model right now. It's much more on the lower cost illegal side of it. We're not seeing it going into these legal growers. It's something that, you know, it's a wonderful, you know, like anything else, marketplace, but it's not something that we're gonna get involved with right now. Okay, great. Thanks. I'll jump back in the queue. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.