Well, good afternoon, everyone. Thank you very much for joining us. This is day one of our 24th Annual Oppenheimer Consumer Growth and E-Commerce Conference. My name is Brian Nagel. I work at Oppenheimer as a Senior Equity Research analyst, covering Consumer Growth and E-Commerce. I'm very pleased to have with us our next presenting company, GrowGeneration, and the company's CFO, Greg Sanders. Greg, thanks for joining us. Thanks for having me, Brian. Appreciate the time. So Greg, Greg and I are gonna structure this as an informal fireside chat, with me asking questions and Greg responding. To the extent there are questions from the audience, just please send them through the chat, and we will work those into our conversation. So with that, we can start with Greg. So the way I'm starting all these conversations across, you know, the various companies I have attending is, you know, just high level. You know, really not, for the moment at least, not specific to GrowGeneration, but just, I would love to kind of tap your knowledge of what, you know, what you're seeing from a broader consumer perspective. You know, this is a big question that investors are having right now as they think about the space broadly. Now, GrowGeneration obviously, serves a unique customer, but I think you still have some nice insights into just the overall or underlying health of the U.S. consumer at this point and what you're seeing. Yeah, Brian, well, where I would like to start it is just some background on GrowGeneration and how we've gotten to today from a sales perspective. The business is 10 years old as of today. Started back in 2014 with about $1 million in revenue. We scaled to about $422 million by 2021. In the last couple of years, we saw the industry go through its correction. So, for 2024, we're guiding to $210 million at the midpoint, and we are seeing, you know, stability out there relative to the space. Now, our volatility from an industry perspective is more volatile historically than most. So that's to frame it a bit. In the first quarter, we did see positive same-store sales comps in our retail business, which was the first time in 11 quarters. So relative to the past couple of years, it was actually quite a strong first quarter for us, and we're hopeful that the rest of the year will continue to carry on from a positive same-store sales comp basis in our retail business. Now, from a consumer standpoint, we are seeing, you know, pricing pressure still within our industry, particularly with our customers. So that is a challenge that we are facing. But we believe that we've surmounted that challenge with bringing on more private label brands, that may have a better cost benefit in certain ways to our end consumers. Our first quarter had 23% of sales from our private label business as a% of overall revenue, which was very favorable and the highest in our company's history. So we are seeing, you know, consumer behavior lean more into that, you know, cost beneficial type of product, which has been a win for our customer base. No, that's a great, that's a great place to start, Greg, so thank you. Y our opening there about the maybe the stabilization we witnessed here in Q1, like you said, you know, the positive comps store. If you step back, what's happening there? I mean, what do you think is changing for GrowGeneration or for your space specifically to kind of enable that stabilization? Yeah, well, I think, you know, it's, it's a variety of things. For one, you know, our industry has gone through its business cycles over the past couple of years, and we think we're emerging into maybe a, a business cycle where there's, you know, a little bit more strength than what we've seen in the past several quarters. You know, in terms of the geography of our space, we sell our products to cannabis cultivators more than any type of other end consumer. And within certain states, there's different dynamics to where, you know, if you're growing cannabis in a specific state, there's no interstate commerce. So if you're growing it within the state, you're selling it within the state. And we've seen some improvements on supply and demand over the past, you know, several months, to where we're seeing strength in certain markets that we weren't seeing a couple of years ago. California was a positive state for us in the first quarter. Michigan was a positive state. We're still seeing struggles in other markets, Oklahoma being an example. So that's one thing that we see from our perspective. Separate from that, on the positive same-store sales comps, you know, we're seeing more adoption of our brands. Right now, we have our Drip powders that we've launched that are in over 350 active trials throughout the U.S., which we believe are performing favorably in trial. And we're seeing more and more adoption of our brands, which helps kind of fuel that same-store sales comp metric as we look at things. We've also brought our store count down. Throughout the last, you know, several, several years, you know, we've moved from close to 70 stores down to 46. And we're servicing more customers out of a smaller amount of sites also now. So let's maybe take a step back. You know, I've now followed GrowGeneration for some time, and, you know, watched very closely the business and how well you and your senior team have basically navigated this rather pronounced, you know, volatility, if not downturn in the space. But I think one of the more interesting factors right now is, in my mind, you know, the GrowGeneration model has shifted. I mean, you know, it is evolving. From your perspective, if we look at GrowGeneration today, you know, how is the business different than it was, say, a couple of years ago? And then with that, you know, is assuming, you know, that we are heading towards some, like you said, stabilization, some recovery in the broader cannabis market, how will GrowGeneration be different in that type of environment going forward? Yeah, I think, you know, a few years ago, it was really the race to get market share, where we were standing up stores in as many states as were coming online. We were involved in a lot of M&A. We did over 50 M&A transactions in our lifetime up until this point, and we're really focused on building. The last couple years, through the downturn of the industry, we've been focused on becoming a more simple and efficient business model. You know, we've, quite frankly, we've invested more into our supply chain and technology to where we have over 50 vehicles in our fleet, and we can service our customers within a day or two, most anywhere, to make their lives as simple as possible, where we can deliver the soils and nutrients and products that they need for their cultivation. We've focused more on making it easy for our customers to transact and, developing our supply chain to support that over the past, you know, several quarters and, and years through the downturn. We really built the business on retail, and retail will always be an important part of our business, but it's not everything in terms of what we do. We did become the largest specialty retailer in our space, being, you know, hydroponic and organic gardening supplies, and we believe we're still in that position within the U.S. markets, and we'll continue to focus in on that. But we're a lot more diverse today in terms of our offerings. The biggest change outside of the supply chain and the way that we transact with our customers is that private label side of things, with our nutrients and soils and lights, and the emergence of those products that we've seen, and adoption from those customers. We'll continue to build on that part of our business as time progresses. As I mentioned earlier, it's around 23% of our sales in the first quarter, and the remarks that we've made historically is we'd like to see it inch up closer to that 30% mark, where it is a very valuable and important part of our business. You know, we believe in innovation, so. Let's expand on that private label, because I think, again, I think that's a key part of the story, too. So you mentioned there, you know, where you are today, where you're going to, but I guess from an investment standpoint, what's gonna drive the growth? Is it? Are you on the lookout for to buy brands to bring them into the GrowGeneration fold? Will you develop your own brands? And then how should we think about, I guess, you know, just the simple profitability? I mean, how does it? What's the profitability of a private label product versus a branded product? Yeah, so we'll start with the profitability end of things. It depends really on the type of good. On a hard good, like a light, maybe you're seeing 10% more gross margin on that type of product. On a consumable product, which is your kind of recurring type of product, maybe it's soil or nutrients, you're seeing upwards of 20%-40% more on that type of product from a gross margin perspective. So it is a more profitable product for our business, which, of course, helps the financial results of the business. Separate from that, I think there's different ways to look at innovation, particularly in our industry. We see different companies handle it in different ways. We've been more nimble than others, where we haven't rushed to spend millions and millions of dollars to stand up facilities ourselves that we own to perform our R&D in. We're partnering with the cultivators and engaging the cultivators in our process to where I mentioned earlier on the Drip powders, we have over 350 active trials out there right now. Those trials are with licensed cultivators throughout the U.S., whether it be MSOs or large single- state operators. So we're engaging our cultivators to get their buy-in in the process as well, in terms of, you know, how we spearhead innovation in R&D, and get the feedback from our cultivators in terms of, you know, what they are looking for, and getting their feedback in terms of our process. So that's been a huge piece for us, and we believe, you know, it really does help strengthen the overall financial results of the business as we continue to see pressure on pricing, you know, across the landscape. Can you maybe also highlight, you talk a lot about the nutrients, but are there real key wins you've had so far in private label that really help to differentiate, you know, from the consumer's perspective, GrowGeneration in the market? Yeah, I think we see it every day when we kind of go through reporting. You know, Char Coir is our number one brand right now in our entire portfolio, which is our soil product. It is our best-selling product in our entire portfolio, so that is a huge win for us. We're seeing adoption of the Drip liquid nutrients that we rolled out last year. It grew from a business that didn't exist to a very meaningful business last year for us, and we expect the powders to do the same. We did go out and buy Power Si, which is a nutrient brand in the fourth quarter of 2020, which has been a strong and stable brand for us through the past several years. Now, in the same sense of, like, when we look at retail, we scaled more on buying businesses than building. I think we've taken the opposite approach to brands, where we're focused more on building than buying on that end of things. Now, if an opportunity is right, we certainly have the cash balances to look at transactions, but we find it to be a more meaningful, more accretive path for our business right now to build as opposed to buy when it comes to the brands. Going back to the point you made, it was 20%-23% of the sales are private label, I think, as of Q1. Yeah. Now, my apologies if you already mentioned this, but where should that go? If you're, if, you know, you and your team are looking at this and saying, "This is where given the dynamics within this cannabis retail cannabis space", so to say, where, where should private label go over time, as a percentage of sales? Yeah, we would like to see that number go up to 30. We look at a lot of other good, large retailers in the space, and we believe that that's a good benchmark for our business. You know, we think it creates a more competitive landscape for the cultivator, more optionality. And for us, you know, it creates a better gross margin profile for our business. So we're continuing to aim towards that 30 mark, which we believe is more of a 2025 initiative for our business. For this year, we're targeting the upper 20s in the back half of this year as a benchmark. So let's talk just a bit about stores. Now, you mentioned, you know, in your opening opening comments, you know, that GrowGeneration has selectively, strategically closed a number of units. I think it's gone from 70 down to 46. So, I guess maybe we could talk about that effort. But then, I mean, more importantly, again, as we see this business continue to evolve against hopefully, a stabilizing, improving demand trajectory, what should the base of stores ultimately look like? Yeah, so let's start with the rationalization. What we've done throughout the last couple years is we've brought down our expenses tremendously. When we went from $422 million in revenue to about $210 million today, you know, we had to rationalize our costs, and we cut out about $30 million in expense. A lot of the reductions that we've made are relative to the store closures that we've done, and we took, you know, a position such that our industry is not so large that we need a store on every corner. So let's say, you know, we have two stores in Denver. Maybe we only need one. Two stores in Colorado Springs, maybe we only need one. We can generally service the same customer base out of one location, as opposed to needing to have multiple locations in the same market. Especially when you add in the fact that we deliver products to our largest customers, and we have the supply chain and the vehicles to support that type of activity. So we've rationalized on what we believe is largely servicing the same customer base from a smaller footprint of locations to rationalize operating costs. Separate from that, you know, where is the right base? Right now, we're at 46 stores as of today. We see opportunity to consolidate maybe a few more this year, but we generally feel that we're in a good place from a store count perspective, and we're not planning any new adds this year. We'll certainly let you know if that changes. You know, there's new states that are opening up or have opened up recently that are opportunities that we're kicking around, but nothing that we're ready to announce definitively as of today. So on that point, you know, and I recall when, when a state did open up or legalized, you know, either medicinally or, or recreationally, I mean, GrowGeneration moved in quickly. In some cases, you actually moved preemptively. H as that strategy changed now? Yeah, yeah, I would say it largely has. You know, you saw us move into Missouri and St. Louis maybe a week before they went live. Oklahoma, we were one of the first entrants, so we've been the first entrant in a lot of these states, and tried to plan that ahead of time. I think right now, with the strength of our supply chain and what we've done with our distribution centers and our private label capabilities, we believe there's an opportunity to distribute our products through some of those other independent gardening centers and hydroponic stores in some of those pre-existing states and get into those markets through that avenue as an initial path. And certainly, we'll look at any market. You know, we're very opportunistic in terms of the way that we've built this company out. So we'll look at any opportunity that comes into play, but right now, we're not, we're not scrambling to be the first in, in a specific state relative to just the industry and, and the trends that we've seen over the past couple years. So the interesting point you're bringing up, that, you know, GrowGen could act more as a, in some cases, like a distributor of products as opposed to an actual retailer here. So, if I heard that correctly. Now, is the infrastructure in place to do that, or there's some type of investment needed to facilitate that type of business model? No, we have the infrastructure today. We have around 900,000 sq ft in our portfolio across the United States, two large distribution centers, one in Columbus, Ohio, that services the east half of the U.S., and one in Sacramento that services the west half of the U.S., and the fleet and the personnel to execute. So we believe that we have the right resources to accommodate that as of today. And I would assume the private label offering is really key to that effort? Yeah, completely key. So let's talk a bit about just the expense structure. Again, you mentioned, and I agree that, you know, GrowGen did a great job of, you know, bringing expenses down, you know, to sort of adjust to a weaker sales environment, keeping the company close to profitability. But I guess the question I have is, you know, as we look towards this forthcoming potential recovery, when that happens, how leverageable will the GrowGen expense infrastructure prove, or will there have to be a some type of significant reinvestment back into the business? Yeah, we believe that our operating leverage today is tremendous. You know, we've cut over $30 million in expenses. Now, store rationalizations are definitely one. If you were to go back into our 10-K in 2021, we had around 800 employees. Today, we're around 450, so we've done a lot of payroll reductions in certain areas as well. We've cut expenses in a lot of areas. Now, we haven't cut too much. We believe we actually have some opportunity left to kind of get through some of the final ends of reductions from a cost perspective, and we expect our costs to be down in 2024 compared to 2023 as we get through some of those final efforts. We believe our cost structure is in a good place based on our revenue size, but there's a little bit more work to be done to get the business back to a more profitable state. You know, I think for us, our SG&A is still a little bit high, and maybe we don't want to take it down completely. We think there's opportunities to grow the business, so you tend to maybe wanna leave a few dollars in SG&A to help grow things as well, which we're focused in on right now as we look at this year. So our expense base is, you know, trimmed down significantly, and we feel like it's at a healthy level for where our business is today, and those expenses will continue to come down a little bit as we see kind of some of the work-through of some of our efforts, particularly in the fourth quarter and Q1 of this year, from a few more store closures that we executed on and a few other strategic initiatives that'll help improve the overall margin of our total business. W ho does GrowGen compete with? Who are the primary competitors? And, and then as, again, given that, you know, the cyclical downturn that's occurred within the space, I mean, how has that competitive set changed? Yeah, from a competition standpoint, you know, there's a few other players that are direct competitors in our space that are, you know, definitely smaller than us. You know, we're the largest from a revenue and a store count perspective, I think by a healthy margin. You know, a lot of our customers will go direct with certain suppliers and see price breaks that way. We also see some competition from the online landscape. The industry is still very fragmented in the way that we look at it, and when our co-founders, you know, Darren Lampert and Michael Salaman, set out, you know, part of the strategy was we're gonna roll up and consolidate a very fragmented industry that was encompassing about 2,000, you know, mom-and-pop hydroponic and organic gardening supply retailers. They did a tremendous job of what we believe, you know, buying the kind of best chains and stores that were out there for the most part. So there are still, you know, a handful of stores that are out there that are very fragmented in nature and small, kind of, local community shops. But in terms of competition, that is, you know, who we're competing with, and we see them as allies in certain ways from our private label side of things, where we're getting distribution with a lot of those other, you know, retailers and wholesalers in the marketplace. So, you know, it's a competitive landscape in certain ways, but we're also working together and trying to service the same industry and get to the same ends. So let's talk just a bit on a high level. You know, like, again, I know a conversation I've had with, you know, you and the team for a while just on, you know, what has to happen, you know, from a, I mean, a legislative standpoint or, you know, whatever, to, you know, to drive, you know, to really to facilitate your business. But I think we have seen, you know, potentially some progress legislatively lately, lately. So I guess the question I have is, a s you're watching this, you know, what do you think, what's your view on, on what, what's happening from a legislation standpoint? Where do you think we're going, and how could this ultimately benefit a company like GrowGeneration? Yeah. No, it's a great question. You know, today, about two-thirds to 75% of our business is still directly to the cannabis cultivators, so it's still a very important part of our business, so we are definitely focused on what's happening. You know, we were encouraged when the FDA, the Health and Human Services, and the DEA recommended rescheduling over the past, you know, at this point, it's probably nine months that this has been ongoing. Will federal reform happen? We're hopeful. We know we're in the comment period right now to where we're waiting for comments to come back in, and we're hopeful that there will be a positive ruling later in the year, but it's too early to tell. You know, we've been hopeful for several years that we'd see more momentum out of Washington, D.C., and, you know, we've been as patient as anyone, but, you know, at the same time, we'd like to see federal reform happen. So, you know, what would federal reform mean to our industry? We're excited about it for our customers. We're excited to hopefully see 280E go away if it happens. You know, the tax implications of those growers to be taxed on gross margin as opposed to net income, we believe is unfair to that industry. And we've seen figures thrown around anywhere from, you know, $1 billion-$3 billion in terms of what the elimination of 280E would mean back from a cash perspective into the industry, back onto the balance sheets of those cultivators would mean. You know, we definitely support seeing reform, and we're hopeful that it will happen. But do we have any sort of, you know, belief that it's definitive? It's too early to tell, but we're definitely hopeful. So as you try, and I know, you know, you as a company are very close to your customers. I mean, is this what you're hearing from your customers as well, is that they're they basically look at this as it could be a, a significant positive for their business? Yeah, we see it as a catalyst for the growers. We see it as a catalyst to put more cash onto the balance sheets to shore things up, to which in turn leads to more development for those businesses to expand, to, you know, refresh their current, facilities, and, and, you know, enter new markets and, and build again. When we look back at our business in, you know, 2020 and 2021, there was a lot of building going on. Just about every state was building out, and there was a lot of CapEx flowing through our results. Nowadays, there's a lot less CapEx. You know, still a healthy level of consumables, but we're excited to see, you know, what 280E and the elimination of it could mean for our industry and more building back in the space, and that has a downstream impact to our business and our ability to support those customers and, you know, get them the supplies that they need and the CapEx materials to build with some of the cash that we believe would come back onto the balance sheets. So, Greg, I know, you know, I mean, I think me and most of, you know, investment community tends to look at GrowGeneration primarily at play within cannabis. But you, you've talked, but you alluded to a bit here today, but then we talked about in the recent past about, you know, the opportunity for GrowGeneration to serve customers outside of cannabis. So maybe you want to talk about that a bit here. I mean, where would that opportunity be, and how big, how large could the opportunity be over time? Yeah, you know, the cannabis industry will always be important to us, and it will always be part of our customer base and something that we aim to service as a high priority. But what we've seen over the past several years is really the need for diversification, and I think we've done that with a lot of our private label offerings, where, you know, we're working with, you know, more private label products that service the home gardener. And we believe that that's an enormous, industry that, you know, is, is a, is a runway for our business as well, separate from what we're already accomplishing. We believe in the sustainable farming end of things outside of cannabis also. There's a lot of produce in America that's grown in many different ways, and when you look at sustainable farming, we think there is a long runway for the types of products that we sell and service our customers with in terms of specialty crops and leafy greens and other types of produce outside of cannabis as well. So we're excited about those types of cultivators also, but it's still very early. We've seen a few players out there, even in the public markets, take a swing at that picture, and it's tough on the economics right now to where you can sell a pound of cannabis for somewhere in the neighborhood of $1,000-$2,000 a pound, depending on the market, sometimes less. On specialty produce and leafy greens, it's a much lesser price per pound, as you can imagine. So we're waiting for the economics to work in that industry, but we are poised to work with that type of cultivator. And there is a lot of these different pockets of strength that we believe are in our long-term runway that excite us and keep us engaged. And we're looking forward to working with more consumers. Right now, when you look at the cannabis space, you know, we work with maybe somewhere in the neighborhood of 50,000-60,000, you know, cultivators out there, from your smallest B2C customers to your largest MSOs. And if, of course, as you know, the home gardening market is much, much larger, and there's a lot more opportunities for us in these different pathways as we progress. As our time starts to wind down here, I mean, the one final topic I wanted to discuss, and again, another positive, I think, in the within the GrowGeneration stories is the balance sheet. I mean, and so I guess to get your perspective on, you know, where you are from a cash position. You know, is it enough? I mean, kind of how as you look at cash management for the company, particularly as the industry stays softer, at least in the near term. Yeah, so I think, you know, cash-wise, we've managed our balance sheet to, you know, maintain around $60 million -$70 million in cash through the last several years, no debt on our balance sheet. So we were very conservative through the downturn of the industry to make sure that, you know, we managed our balance sheet tight, and I think we've done that. Now that we believe we're kind of through the roughest parts of the downturn, you know, we announced a buyback at April 1. So we are buying back shares, so as long as it complies with our 10b5-1 Plan. We are looking at opportunities to reinvest back into our business through our supply chain technology. We're underwriting more credit than I can remember in the last several years throughout this year, so we're investing back into our customers to help them scale and free up some liquidity on their balance sheets as we've gained more comfort in a lot of these customers and their profiles. And, you know, we're putting our cash to work more to start the year, as opposed to being very restrictive and tight in the way that we have the last couple of years, as we see opportunities and maybe some emergence in certain areas right now. T he management of our balance sheet has been very important for us and will continue to be, but we're taking a slightly different position this year as we see more opportunity. Is there anything we haven't discussed here that you want to make sure, which should be part of the conversation? No, I think this has been very comprehensive, Brian. You know, definitely appreciate all the questions and your time to lead us here. You know, appreciate all of the investors and shareholders that have shown interest in GrowGeneration, Darren and Michael, our co-founders, and our employees who, you know, work to support our organization day in and day out. This has been a great call, and I certainly appreciate you narrating and coordinating, Brian. Well, great. Thank you, as always, for your time, and good luck here. Thanks, Brian. Have a good rest of the day.