GrowGeneration Corp.

Good afternoon, ladies and gentlemen. My name is Leonie, and I'll be your conference operator today. At this time, I would like to welcome everyone to Grow Generation Corp. first quarter 2019 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. Thank you. I'd like to turn the conference over to your host, Mr. Michael Salaman, president. Please go ahead.

Thank you. Good afternoon. My name is Michael Salaman, co-founder and president of Grow Generation Corp. At this time, I would like to welcome everyone to the Grow Generation first quarter 2019 earnings call. With me is Darren Lampert, our CEO, and Monty Lammaretto, our CFO, who will both be participants on our call this afternoon. After our CEO and CFO's remarks, there will be a question and answer session. One bit of housekeeping related to our IR activities. Our shareholder meeting is scheduled for 3 p.m. May 16th at the Law Offices of Robinson & Cole in New York City. With that, let's move forward on today's call. As always, we expect to make forward-looking statements this afternoon, but I want to caution you that our actual results could differ materially from what we say here. Investors should familiarize themselves of full range of risk factors that could impact our results, and those are filed in our Form 10-K, which we filed with the Securities and Exchange Commission. I'd also remind everyone that today's call is being recorded. and an archived version of the call will be available on our website later today. Let's get things started. For those of you who are newly being introduced to Grow Generation, we're a publicly held company trading on the OTCQX exchange. We are the largest and fastest growing chain of hydroponic garden centers selling directly to all types of cultivators and growers throughout North America. Our growth has been driven through same-store sales and from an acquisition strategy, we aggressively opening up new locations. Since our inception, the company has delivered year-over-year growth of over 100%, selling thousands of specialty products and servicing tens of thousands of growers of all types. With hyper-growth comes infrastructure, which we've built across sales purchasing, logistics, technology and accounting. The company now has the foundation to surpass $100 million of revenue profitably next year. Today, we have five wholly owned subsidiaries that reflect the corporate initiatives and strategies of the company for 2019 through 2020. First subsidiary is Grow Generation Canada Corp., which is a corporation that we formed to expand our operations into Canada, which we plan to do in 2019. Second, Grow Generation Management Corp. is securing large capital projects and build-outs consisting of a team of 10 commercial experts. Three, Grow Generation Hemp Corp. is a dedicated division solely for developing a supply chain of agricultural products solely for hemp farms. Fourth, GrowGen Distribution Corp. is developing and has developed proprietary products across all product categories to drive higher margins and generate sales into various vertical markets. And lastly, advancing our e-commerce strategy through our recent acquisition of heavygards.com. We are now adding e-commerce functionality to all of our locations, which we plan to have completed by the end of this year. With that said, I will now turn the call over to Darren, who will present the financial results of our first quarter.

Darren. Thank you, Michael. Good afternoon and welcome to our first quarter 2019 earnings call. We'd like to begin our call by thanking our shareholders, management, and employees for the continued support and belief in the mission Michael and I set forth five years ago to build the largest national chain of hydroponic stores in the United States. With 21 locations in eight states, a rapidly expanding online superstore, heavygardens.com, today GrowGeneration is the leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems, and accessories for hydroponic gardening. The company's first quarter financial results were transformational. We improved the financial performance of the company in all areas. I'm going to read this one more time because it's been five years and this is such an important milestone for Grow Generation and its staff. The company's first quarter financial results were transformational. we improved the financial performance of the company in all areas. Revenue was up almost 200% year over year and almost 50% from fourth quarter 2018 over first quarter 2019. Adjusted EBITDA was over $600,000 at a positive two cents per share. Our same store sales were up approximately 42% year over year with margins increasing over one basis point. Year over year, the company increased revenue by $2 million in California and Colorado, $1.5 million in Michigan and Oklahoma, and $500,000 in both Rhode Island and Nevada. The newly acquired stores and our new store openings are all performing much better than expected. Our newly acquired e-commerce store, Heavy Gardens, added almost $700,000 in new revenue. Our commercial division added over $2.5 million in revenue from some of the largest multi-state operators in the country. GrowGeneration now services Harvest, Tilt, Ianthis, and Cresco Labs, to name a few of our multi-state operators. Our strategies to increase margins are working by purchasing in larger volume and buying more efficiently. With our significant top and bottom line growth, We were still able to reduce our operating expenses by 26% and our corporate overhead by over 100% as a percentage of our revenue. As our revenue continues to increase and corporate overhead stays relatively flat, we will continue to increase net income quarter over quarter. With Q2 being our traditionally strongest quarter, revenue and net income are trending significantly higher than our first quarter numbers. We have a strong pipeline of new acquisition targets set to close in Q2. The company continues the process of uplisting the company to a larger exchange. We are increasing our guidance for 2019 revenue to 60 to 65 million and adjusted EBITDA to 14 to 18 cents per share for 2019. I'd like to go over a few of our first quarter 2019 financial highlights. adjusted EBITDA of $615,000 for Q1 2019 compared to adjusted EBITDA of negative $366,000 for Q1 2018. Net income of $229,000 for Q1 2019 compared to a net loss of $953,000 for Q1 2018. Revenue of $13.1 million up 8.7 million or 199% over Q1 2018, revenues of 4.4 million. Same store sales were 42% for Q1 2019 compared to Q1 2018. Acquired stores in Denver, Colorado, Palm Springs, California, and Reno, Nevada, and opened Tulsa, Oklahoma, and Brewer, Maine locations in 2019. To date, all stores are performing better than expected. Gross profit margins percentage was 28.2% for Q1 2019 compared to 27.1% for Q1 2018. Store operating costs as a percentage of revenue have declined 26% from 20.4% for Q1 2018 to 15% for Q1 2019. Corporate overhead declined 107% from 21.8% of revenue for Q1 2018 to 10.5% of revenue for Q1 2019. The company has 6.6 million in cash and cash equivalents at March 31, 2019. As of March 31, 2019, the company had working capital of 17.4 million compared to working capital of 21.6 million at December 31st, 2018. With that, I'd like to turn the call over to Monty Lamaretto, our CFO, who will present the financial results in more detail for our first quarter.