Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Hydrofarm Holdings Group Q4 and Fiscal Year 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, March 9th, 2023. I would now like to turn the conference over to Anna Kate Heller at ICR to begin. Please go ahead. Thank you. Good afternoon. With me on the call today is Bill Toler, Hydrofarm's Chairman and Chief Executive Officer, and John Lindeman, the company's Chief Financial Officer. By now, everyone should have access to our Q4 2022 earnings release and Form 8-K issued today after market close. These documents are available on the investors section of Hydrofarm's website at www.hydrofarm.com. Before we begin our formal remarks, please note that our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from our current expectations. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that can impact our future operating results and financial conditions. Lastly, during today's call, we will discuss non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release. With that, I would like to turn the call over to Bill Toler. Thank you, Anna Kate. Good afternoon, everyone. 2022 was a challenging year for our industry and as a result, for Hydrofarm. However, I'm encouraged to report that we finished the year at the upper end of our previously provided outlook for net sales for last year. We also generated positive free cash flow in Q4, marking the 3rd consecutive quarter of positive cash generation. While I'm encouraged by these metrics, it is really the many decisions we made and the actions we took last year that leave me the most optimistic about our future. In Q4, our team here in the U.S. consolidated our product portfolio, eliminating more than 40 brands and 1,100 SKUs, representing about 20% of our brands and over 33% of our SKUs. We have also begun to right-size our manufacturing and supply chain footprint by closing a nutrient manufacturing facility in Canada, and we've begun subletting some space in our distribution centers. In addition, we have reduced total headcount by more than 30%, primarily as a result of integrating the companies we acquired. We've also aggressively reduced our working capital and have begun to further expand our sales efforts into non-cannabis channels, including CEA, food and floral, and lawn and garden. As you see in today's earnings release, some of these actions started in Q4 and were part of a restructuring initiative, which John will elaborate on later. Collectively, these actions set us up to be a leaner, more nimble, more diverse, and importantly, more profitable business. Looking ahead, I see brighter days ahead on many fronts. From a sales perspective, we have experienced stabilization in our average daily sales from November of 2022 through February of 2023. We're also starting to see some positive signals from several industry metrics. Although no single data source captures a complete view of demand in the hydroponic or cannabis industry, we are encouraged to see several data points that reflect some level of stabilization. In particular, according to Headset Data, U.S. cannabis dispensary inventory in 2023 is below the average inventory in 2022. U.S. cannabis prices have been stabilizing in many markets, while U.S. cannabis dispensary sales, measured by unit volume, has continued to grow. We believe our recent sales trends and these positive signals give us a reason to expect a return to growth in the second half of 2023. From a profit margin standpoint, we expect to see many of the benefits of the actions we took in 2022 come to fruition. Specifically this year, we expect improved sales mix, more focused and efficient trade spend, and increased productivity across our manufacturing and distribution centers, all of which will help in drive improvement in our Adjusted EBITDA and our Adjusted EBITDA margin. Finally, as we begin a new fiscal year, I'd like to remind all of our stakeholders of my bullish view on the long-term prospects for our category and for Hydrofarm. Our company has a long history of double-digit compound annual growth, despite some brief periods of revenue softness. The fact still remains that in the U.S., the largest consumer economy in the world, a large portion of the population is still just beginning to experience the improved access to cannabis, reduced stigma, and higher quality branded products that come from legalized medical and adult use regulations. That should drive more reliable and trackable consumption patterns. Given this incredible industry dynamic, our team remains resilient and focused on executing our strategy to position the company for higher margins and future growth. For these reasons, I've made several open market purchases in 2022, continuing to increase my personal investment in Hydrofarm. My actions support my view that we are positioned to be a proven leader in the hydroponic industry. With that, I'll turn it over to John, who will discuss further details of our Q4 financials and provide our outlook for 2023. John? Thanks, Bill, good afternoon, everyone. Net sales for the Q4 were $61.5 million compared to $110.4 million in the prior year period. Our 2021 acquisitions added 3.1% to our top line in the Q4 of 2022 relative to the prior year period. This M&A benefit was more than offset by a 46% decline in organic sales volume. We realized a 0.9% price mix decline in the quarter, which was driven by a strong effort from our sales team to sell through discounted lighting products. Without that factor, we estimate that our Q4 price mix impact would have been positive similar to prior quarters. As noted in prior quarters, the industry recession continued to have an impact on our sales mix. While proprietary brands increased as a percentage of total sales to over 55% in Q4, the margin contribution of our proprietary brand category was diluted by the sell-through of discounted proprietary branded lighting products. We did see some positive sales trends in the quarter. First, the level of year-over-year sales declines improved in Q4 from Q3 in several more mature states, including Oklahoma, Colorado, Oregon, Washington, Michigan and Maine. Second, our commercial sales continued to advance on a relative basis. For the full year 2022, our commercial sales represented approximately 40% of total sales versus approximately 25% in the prior year. I will now take a minute to discuss our restructuring initiative. As you heard from Bill, we instituted a restructuring initiative that included consolidating our product portfolio, consolidating our Canadian nutrient manufacturing facility, eliminating our China office, and terminating contracts to help reduce future facility and transportation costs. As a result of these actions, we recorded pre-tax charges of approximately $7.7 million in Q4, of which approximately $6.1 million are non-cash. We also expect to incur approximately $1.7 million of additional charges, primarily in the first half of 2023, as we continue to execute our restructuring plan. We believe that our restructuring and related actions will result in efficiencies and cost savings of approximately $7 million on an annualized basis. Gross loss in the Q4 was $0.5 million compared to a gross profit of $18.7 million in the year ago period. Adjusted gross profit was $9 million, or 14.7% in net sales in the Q4, compared to $23.3 million or 21.1% in net sales last year. The decrease in adjusted gross profit margin is largely due to proportionally higher freight and labor costs and $0.7 million of inventory reserve and related charges for which we did not adjust. Selling and general and administrative expense was $26.2 million in the Q4 of 2022 compared to $27.7 million in the year ago period. Adjusted SG&A expense was $17.4 million in the quarter versus $18.4 million last year. The decrease was primarily due to a decline in employee compensation costs, professional and outside service costs, and facility costs, partially offset by an increase in insurance expense. I should also note that adjusted SG&A in Q4 was negatively impacted by $1.8 million in accounts receivable reserves and related charges that we took during the period. Finally, adjusted EBITDA decreased to a loss of $8.4 million in the Q4 from a $4.9 million profit in the prior year period. The decrease in Adjusted EBITDA was driven primarily by lower net sales, lower adjusted gross profit margin, as well as $2.5 million in inventory and accounts receivable reserves and related charges, again, for which we did not adjust in our EBITDA calculation. Moving on to our balance sheet and overall liquidity position. Our cash balance improved to $21.3 million as of December 31st, up nearly $5 million from the Q3. We ended the year with an aggregate principal amount of debt outstanding of $125.8 million, the vast majority of which does not mature until 2028. As was the case for the entirety of 2022, we have zero drawn in the company's revolving credit facility. We estimate total liquidity of approximately $61.3 million as of December 31st, comprised of our cash position plus approximately $40 million of available borrowing capacity under our revolving credit agreement. We generated positive free cash flow in Q4 and accumulated approximately $14 million in total free cash flow for the full year 2022. Let me now turn to our full year 2023 outlook. We expect net sales in the range of $290 million-$310 million for the full year. Our estimate assumes a seasonal lift in the spring and summer months, which we expect will be modest in comparison to the lift we have seen in four of the last five years, and which we expect will result in growth resuming in the second half of 2023. We are modeling that on the heels of the restructuring initiative in which we reduced SKUs and brands, largely in our distributed and preferred product categories, that we will see a further increase in the percentage of our proprietary brands sold. We expect to feel some negative pricing impact in Q1 from the continued sell-through of discounted lighting products, but then expect positive price mix will resume for the remainder of the year, primarily from the benefit of price increases put into effect across the course of 2022. We do expect to realize productivity savings in 2023, which on top of a more favorable sales mix, should further energize our adjusted gross profit margins and help us return to margins that approach 2021 levels. To get there, we need to see sales levels within the expected range, continued improvement in our sales mix, productivity improvements contributing to lower costs, and minimal increase in inventory reserves. We expect Adjusted EBITDA that is modestly positive for the full year 2023. This assumes a significant improvement in adjusted gross profit margin, some reduction in Adjusted SG&A, and the expectation that inventory and accounts receivable reserves are largely behind us. We expect to generate positive free cash flow for the full year 2023. We expect that with total sales down from our 2022 levels, we will continue to reduce our working capital and generate positive free cash flow. I should note that we do not expect to generate positive free cash flow in Q1, primarily because of the seasonal nature of our cash flows. Just to be clear, we do expect positive free cash flow for the full year 2023. We have laid out a few other assumptions in today's earnings release, and we encourage you to review them in conjunction with our full year outlook. In closing, I wanna thank our team at Hydrofarm for all they did in 2022 to better position our business for improved profitability in 2023 and beyond. With that, let me ask the operator to open the line for any questions you may have. Thank you. Ladies and gentlemen, we'll now conduct the question-and-answer session. If you'd like to ask a question, please press star, then one on your telephone keypad. If you'd like to withdraw your question, press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Your first question comes from Andrew Carter from Stifel. Please go ahead, Andrew. Yeah, thanks. Mentioning the lighting, kind of, actions that you show up that's negative pricing in the quarter. First off, could you tell us the impact to the product margin? I might be confusing things in what's adjusted and what's not. Number two, you have more to go in the Q1, if I understand that. If I look at your drawdown in the Q4 of inventory, it was a $26 million or so benefit to cash flow. Was the majority of that the lighting product moving? How much more kind of inventory drawdown do you think you can do and still maintain a healthy business? Yeah, I can jump in there and start, Bill. Thanks, Andrew. I think our lighting sales in Q4 were roughly about 10% or 11% of our total sales, give you some perspective. As we indicated, there definitely was some margin compression. A good chunk of our lighting that we sell is proprietary branded. Again, when you think about the discounted lighting products we're selling, that are branded, it's predominantly the high-pressure sodium Phantom lights, dominantly, that were sold through in Q4. We do have some more inventory of those, although our team did do a very good job selling through it in Q4. I think we expect that we'll work through the remainder of it in Q1. Okay. we've taken- Got it. Take price- Yeah. Full amount of all the stuff we expect to sell through. Yeah. Gotcha. Kinda the second question is, now that you've kinda done this restructuring initiative, if you back into your volumes this year, you're 60% of where you were in 2021. Can you give us any sense of kinda where your manufacturing network is from a utilization standpoint? If we have another step down in volume, is there more to take out? Just anything you can give us on that, on that front. Thanks. Yeah. As you well know, we bought sort of four nutrient businesses. That's the place where we have the most overlap. When we brought them in and then the volume declined, we probably had utilizations in the 20%-25% range. By closing the Canadian facility, that moves them up maybe in the 30s to low 40s. We still have room to go there. We don't want to have to do any more of that, but we certainly have some levers to pull. We also have some options of perhaps developing a different located site, maybe in the East or Midwest, where we don't have production today. All the facilities we have now are kind of on the West Coast, so moving that to the Midwest or East could be an option as well. We certainly have some more levers to pull if we find that we need to get, you know, further cost out or further optimization of the footprint. Thanks. I'll pass it on. Thanks, Andrew. Your next question comes from Andrea Teixeira from JP Morgan. Please go ahead. Thank you, operator. Hi, everyone. Just wanted to go back to the commentary. A couple of things I wanna clarify. In terms of the debt capacity and liquidity, I know, John, you mentioned that you feel comfortable, but just to make sure that we are not missing anything and moving pieces there in terms of your revolver or any financial needs that you may expect. I think you put in $40 million now. The other clarifications on what you mentioned in terms of the gross margin approaching 2021 levels. Just doing the math, with the lower level of revenues, I think you're just saying Adjusted EBITDA that is modestly positive. We can kind of back out, and then the positive free cash flow. Just wanted to make sure that we have the moving pieces from a gross margin perspective and how we should be thinking in the $ EBITDA and how we should be thinking of progression of the quarters. When I say approaching, is that towards the end of the year when we have more of the results of the restructuring, how we should be thinking of all these moving pieces from a cadence perspective? Sure. Let me try to take those in order, if I can, Andrea. Liquidity, yeah, I think we mentioned roughly $60 million of liquidity at the end of the year. That's $20 million plus on the balance sheet and cash plus $40 million available on the line. You know, we continue to feel good about our liquidity position for a number of reasons. Again, our debt doesn't come due. The bulk of our debt is really held in our term debt facility, roughly $124 million of the roughly $126 million that we mentioned. That doesn't come due until 2028, and the principal portion that amortizes only amortizes about 1% a year, which is roughly $1.3 million. Mm-hmm. You know, from a liquidity standpoint, you know, we continue to feel good. As we noted, we expect to continue to generate positive free cash flow for the full year 2023. We've now done that three quarters in a row, Q2 through Q4, and feel good about our prospects to continue to do that into the coming year. The way in which we've been having good success doing it, and we expect to continue to have success, is as the demand levels have shrunk in the category, in this brief period, we've been able to reduce our investment and working capital and take down our working capital, and that's been generating cash for us. We feel like with the call down that we've had, that we've given you in terms of our outlook for 2023 versus 2022, that once again gives us that opportunity to continue to pull down our working capital. Mm-hmm. In terms of the margin call for or rather sort of the modest EBITDA, let me sort of attack it this way, if you will. Our adjusted gross profit margin in 2022, which we reported, was 14%. Our outlook, as you heard us say earlier, assumes minimal added inventory reserves for 2023. You might wanna consider the $18.5 million in inventory reserve expense in 2022 that we did not add back. On that basis, that would drive an improvement in the adjusted gross profit margin that kind of takes you to, like, a 19% level. On top of that, we estimate that with the price mix expectation of improvement, which we'll get from more effective trade spend, lap pricing benefit from pricing put in in 2022, and a higher percentage of proprietary brand sales, that will have a contribution for us. We have productivity expectation in our manufacturing business, which is associated with the nutrient manufacturing consolidation that is part of our restructuring effort. We have an expectation of productivity in our distribution centers. We're optimizing our daily activity levels against the relatively higher value inventory that continues to exist following the SKU rationalization that was part of our restructuring effort. When you add all those things up, we think it those actions offer another 200- 400 basis points of margin opportunity for us. Again-. Which you think you realize. Sorry. Go ahead. No, go ahead. Yeah, John. This would offer 200-230 basis points opportunity that you think you realize already in 2023, or that's gonna be a long-term goal? No, we think on the sales level that we've called within that outlook range, we have an opportunity, you know, to get there over the course of 2023. That would mean the 21%-21.3%, like roughly. It's about 21%, which is the level that you had in 2021. Just to make sure that that would be at some point, let's say Q3, Q4, or you think that obviously you called out that pricing will be tough in the Q1. I'm assuming you're gonna ramp to that level, but not for the full year, of course. Is that fair? That's correct. Okay. Yes, that's correct. Yeah. Great. That's helpful. In terms of, like, the inventory, you mentioned that the inventory adjustments are mostly done. You still have some pricing concessions, I guess, in the Q1 that needs to work through. Within your guide, like in terms of volume and pricing, how we should be thinking of the 300 in top line, like how should we be thinking in the midpoint $300 million part of how much of that 10% decline would be coming from... Actually more than that, sorry. Would be coming from volume and I guess pricing? I'm sure that the volume decline will be greater than what, you know, the total sales would be down. How much pricing do you still have carryover or mix carryover? Yeah. No, great question. We're estimating that in Q1 we'll have some negative price mix impact, much like we did here in Q4. Again, for the very same reason that we continue to sell through the remaining portion of our sort of high-risk lighting products. We are expecting low single digit positive pricing for the remainder of the year. I think when you sort of look at that across the span of the full year, think of it as a very low single digit positive pricing for the full year. The residual will just be the volume. Okay. That's great. Okay, okay. Perfect. Thank you. I'll pass it on. Thanks, Andrea. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star followed by one. Your next question comes from Jon Andersen from William Blair. Jon, please go ahead. Good afternoon, guys. Hey, Jon. I wanted to ask just about the commentary around stabilization in average daily sales. I'm not sure. I've heard similar commentary, perhaps not from you in this way, but from some others in the industry. I'm just wondering if, you know, you've seen enough of that at this point in terms of the duration, you know, coupled with other input you're getting from customers and others in the channel that, you know, kind of gauge your degree of confidence here that not only can we see stabilization and kind of the seasonal recovery in 2023, but then kind of growth in the back half. What kind of level of growth you're kind of thinking about second half? Yeah. I think it's fair to say that the industry was trending down all the way through October, then it did begin to really flatten and sequentially show a little improvement November, December, January, February. That's good. We think that's, you know, when you take in all the factors seasonally adjusted and all that, you kind of say, all right, we really are, you know, sort of others have said bouncing along the bottom, and I think that's probably a reasonable way to think about it. The other thing that gives us more confidence is kind of the things people are saying, the inventory levels we're seeing in Headset, the pricing stabilization, the kind of, let's say mood and tone we're getting from customers, is speaking to there being people coming back into the business that had probably took 1 year, 18 months off. We think that that is encouraging. You know, it's been a ride. You've been with us the whole time, Jon, and it's been difficult to find the bottom here. We're very cautious about how much we call and how much we're predicting. That's why our, you know, our projection for the year is that $290-$310, which is still not anywhere close to where we'd like to be, but we think it's reflective of how we believe the industry to be performing right now. Part of that back half is of course, you're up against, you know, pretty soft comps from the back half of 2022. Hopefully you're able to show growth off of that and get to that midpoint $300 for the year, you know, and hopefully go past. Fair enough. You mentioned the product portfolio work that you're doing. I think you mentioned 40 brands, perhaps over 1,000 SKUs, rationalized. Where are you, do you think, in terms of that part of the restructuring work? Is that largely complete at this point? Is there more work to do? Where do you think as the industry does recover, how does your business look different, exiting this industry recession than it did, you know, entering? I'm thinking proprietary versus non-proprietary mix, maybe even the kind of the categories that mix across the business and perhaps what that says about, you know, your kind of position in the industry. Thanks. Yeah. No, I think that proprietary should continue to expand, and it should be, you know, 55 last year. It should get deeper this year, maybe 60, 65 in 2 or 3 years from now and get to 2/3 of our business in 2 or 3 years would be, you know, proprietary. We still have some very strong branded partners we represent, and we're proud of that. I think back to your first question, I hope that we exit this phase with a simplified business, right? I mean, we were carrying almost 200 brands and representing, and the industry doesn't need and can't support 200 brands. There should be some natural shakeout in smaller businesses, and some are gonna go away naturally, some are gonna go away not representing them, some will find other people to represent them. I think you're seeing from the bigger distributors who also own brands that we're, you know, focused on fewer SKUs, more powerful SKUs, less brands, less complexity, and hopefully a simpler, cleaner operation, which is what we hope to come out of it on with a higher penetration of proprietary. We have to have the depth of proprietary brands to be able to support the infrastructure to distribute broadly, you know, to the industry the way we do. That's important for everybody to have that kind of healthy, proprietary penetration, if you will. I think simpler business, less brands, less SKUs is certainly there. We've been doing this portfolio rationalization every year now for three and a half years and, I think we've done the big work, but I think every year you should always do the pruning of the bottom 15% or so, and I think you'll see that as more the size of our work going forward. This year was a pretty good whack that we took on, you know, over 30% of the SKUs and, you know, 40 some brands is quite a big change. Absolutely. Last one for me. You did mention that you've seen some, I guess better sequential trends in some of the markets, Colorado, Oregon, Washington, I think you mentioned even Oklahoma. How about in maybe some of the newer states that have been, I guess, somewhat delayed in terms of going live or ramping up? I'm thinking of some in the Northeast Corridor. Any commentary around what you're seeing there and whether that could be a, you know? Yeah ... maybe more positive tailwind as you move forward? Thanks. Yeah, it should be. I mean, Virginia's been frustrating. They keep, you know, fooling around with it a bit. New Jersey and New York have been kinda hot and cold. The ones that have kinda stood out recently, Missouri's been a really good state for the industry, I think. You've seen a lot of quick sales there. You've seen, Louisiana's doing pretty well. There are other places that are popping up now. Yeah, the Northeast really hasn't been the huge wave that we all thought was gonna happen. I think that's been something that's caught us all by surprise, and we hope, they'll get it sorted out. There hasn't really been the, you know, the windfall or the tailwind that we had hoped for. Thanks so much, guys. Thanks, Jon. Your next question comes from Chris Carey from Wells Fargo Securities. Chris, please go ahead. Evening. Hey, Chris. How are you? doing okay. can you just address the, you know, the health of your, you know, core consumer right now and whether you have any concerns there as far as stabilization of the industry? I'm really referring to growers and whether you just have any, you know, read on that one way or the other. Yeah, it's a... You know, you do a lot of research in this area, and you've got a lot of insight as well. As you know, we still sell primarily through the retail channel, and we work with growers but obviously don't sell directly to them. We're close to the growers. I think you're gonna see a good bit of consolidation. I think there's still, in certain markets, like in Oklahoma, far too much capacity been built. I think Canada is still shaking out a bit in that, on that front. California's got an awful lot as well. I think you're going to see some shakeout in capacity and some stabilization by elimination in some of these key markets that got overheated, if you will. Back in 2021, in early part of 2021, they got overheated, and that they had kind of an artificial level of volume that really wasn't supported by the population that they served. Probably had a lot of trans shipments moving around. I think that as other states are now legalizing, that's gonna balance out, and each state will have its own infrastructure to operate the way they choose to operate. I do think you're gonna see some rationalization as these things, the overbuilt areas get consolidated back down. Okay. All right, thanks. I know you've been discounting on lighting, and you mentioned that in the press release. you know, what's your near and medium term view, you know, between consumables and durables? Apologies if I missed this, but, you know, as we're coming out of this, do durables have a, you know, a place in this recovery or, are you even more focused on just, you know, creating a more consumable portfolio, you know, going forward? Just any comments on the near term, but also just the strategic nature of the portfolio. It's still for our portfolio, it's still sort of 2/3, 1/3, consumable versus durable. You know, we had some of our oldest brands are on the durable side, you know, ironically, Phantom and, you know, Active Air and Active Aqua and other ones are there. I think the biggest change in lighting that caused everybody to get a little off kilter was the fact we all got way ahead in inventory and then the speed of which high-pressure sodium shifted to LED, right? Some industry elements have gone completely out of the high-pressure sodium lights. We haven't. We're staying in them with a very limited range, and actually they're doing okay. That part is good. We think that branded representation in each of the key categories is still very important to us as a strategy, as a manufacturer and a distributor. We wanna compete and operate in the lighting business. We think we've got very good products in the lighting business, but our bigger part of our portfolio is gonna be the consumables. It's gonna be the nutrients and grow media. We like that recurring revenue, more rapid, more rapid stream, but we also want to be represented across all the segments. Okay. one just last follow-up on the, on the lighting side. You know, has pricing got to the point where you can clear inventory? Do prices need to still come down? Just, you know, your sense of lighting inventory in general. Is this gonna be, you know, an ongoing process, say, for the next year, or are you getting close? Yeah, no, we do think we're getting close. To your pricing point or question rather, you know, with all of the sort of hard work or decisions we had last year with taking pretty aggressive and pretty significant amount of reserves across the span of the year, really the bulk of that was in lighting. Through that, through that, you know, we put ourselves in a place to be able to kinda discount to levels that we can actually sell through. You know, I think I mentioned earlier, 10% of our sales in the quarter were roughly in the lighting category. That may not sound like a lot because back when we IPO, it was probably about 20% of our business, but it's actually up from Q3. I mention that because, you know, our team did a really good job. I think we mentioned sort of a strong effort. They did a really good job of sort of working our way through this, through this challenged inventory. We do think we've got a little bit more to do. We've kind of focused on trying to get it done in Q1 and then hopefully have some prospects in Q2 to Q4 for a little bit, sort of cleaner selling initiative, without the discount in lighting. Just to give you some perspective on that. The lighting after reserves now, the value of the lighting is about equal to the percent of sales, that it represents as a category for us, and when you look at total inventory. We're much more in line than we would've been, you know, a year or so ago in that. That's a very important dynamic is that you get inventory, you know, relative to your sales penetration by segment. Okay. Helpful. Thank you very much. Thank you, Chris. There are no further questions at this time. I'll turn it back to Bill for closing remarks. Thanks, Colin. Thank you all for the support and interest in Hydrofarm, and I look forward to speaking with you all soon. Take care. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.