GrowGeneration Corp.

Good afternoon. My name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to the Grow Generation Corp. second quarter 2019 earnings conference call. Note that 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. And if you would like to withdraw your question, all you need to do is press star followed by the number two. At this time, I would like to turn the call over to Mr. Michael Salaman, president. Please go ahead, sir.

Good afternoon. My name is Michael Salaman, co-founder and president of Grow Generation Corp. At this time, I'd like to welcome everyone to the Grow Generation second quarter 2019 earnings conference call. With me today 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. 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 with the 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 and an archived version of our call will be available on our website later today. Let's get started. GrowGeneration is now the largest and fastest growing chain of hydroponic garden centers in North America. Today, our supply chain reaches coast to coast, generating over 6,000 weekly transactions. Our second quarter numbers reflect our team's execution and focus on revenue and EBITDA growth. You will hear today from Darren and Monty that all of our financial metrics have improved significantly. Although we've had a successful quarter, our management team is not going to rest on one quarter results, but continue to perform and execute quarter over quarter. In addition to our strong financial performance in the second quarter, we are proud to announce Bob Nardelli, the former CEO of Home Depot, who was appointed as Senior Strategic Advisor. Mr. Nardelli helped grow Home Depot into a $90 billion business and will be providing advice to the company on matters relating to supply chain, merchandise, branding, distribution, new product introductions, pricing and channel selection. Our balance sheet is strong, which allows us to continue purchasing the best of breed hydroponic operators and aggressively open new growth generation locations and every major city in the United States and Canada. I will now turn the call over to Darren who will present our second quarter 2019 results.

Thank you, Michael. Good afternoon and welcome to our second quarter 2019 conference call. We'd like to begin our call by thanking our shareholders, management and employees. for their continued support and belief in the mission Michael and I set forth five years ago to build the largest national chain of hydroponic garden centers in the U.S. With 23 locations in nine states today, Grow Generation is a leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems, and accessories for hydroponic gardening. The company's second quarter financial results reflect our company's continued focus on revenue growth and EBITDA expansion. We improved the financial performance of the company in all areas. Revenue was up 172% year over year at $19.5 million. For the six-month period ending June 30, 2019, revenue was $32.6 million versus $11.5 million for the six-month period ended June 30th, 2018, an increase of 182% year over year. Adjusted EBITDA for Q2 2019 was $1,800,000, a positive $0.06 per share. Adjusted EBITDA for the six months ended June 30th, 2019 is now at $0.08 per share. Our same-store sales were up 23% year over year, Gross profit margins increased to 29.9%, an increase of 5.7 basis points year over year. Gross profit dollars were 5.8 million, an increase of 4.1 million, or 237%, versus the same period year over year. Our strategies to increase margins are working by purchasing in larger volumes and buying more efficiently. We saw significant revenue increases in all key markets. Colorado was up 106%, California 346%, Nevada 143%, Michigan 95%, and Rhode Island up 50%. Our new stores in Oklahoma contributed $2.5 million in revenue in the second quarter, and our stores in Maine added $1.6 million, driven by three newly acquired stores that closed on May 15th. Our e-commerce store, Heavy Gardens, added over $1 million, a 47% increase over our first quarter sales. Our commercial division added over $3.8 million in revenue, up from $2.5 million in the previous quarter. With our significant top and bottom line growth, we reduced our operating expenses by 13% and our corporate overhead by over 42% as a percentage of our revenue. To highlight our four-wall economics as a percentage of revenue, gross profit was 29.9%, store operating expense was 14%, G&A, not including, non-cash was 7%. Adjusted EBITDA was 9.2% of revenue, up from a negative 2.8% year over year. The company continues its rollout of its new ERP platform, adding Northern California, Michigan, Maine, Oklahoma, and Rhode Island stores to our ERP system. The GrowGen ERP platform is designed to lower costs, improve departmental productivity, and provide forecasting and reporting tools. All of our current store operations will be on our ERP platform by the end of 2019. As our revenue continues to increase and corporate overhead stays relatively flat, We will continue to increase net income quarter over quarter. We have a strong pipeline of new acquisition targets set to close in Q3 and Q4 2019. We are also investing in an aggressive new store opening program and are now working with a national real estate company to identify strategic locations in every major city in the United States. The company continues the process of up listing to a larger exchange. We are increasing our guidance for 2019 revenue to 65 to 70 million and adjusted EBITDA to 14 to 18 cents per share for 2019 based on 34.8 million shares outstanding. I'd like to take a few minutes to go over our second quarter 2019 financial highlights. On a GAAP basis, net income, of $1,062,000 for Q2 2019 compared to a net loss of $929,000 for Q2 2018, an increase of $2 million. Adjusted EBITDA of $1.779 million for Q2 2019 compared to adjusted EBITDA of a negative $205,000 for Q2 2018, an increase of $2 million. GAAP earnings of $0.04 per share for Q2 2019, non-GAAP adjusted earnings per share of $0.06 per share for Q2 2019, and $0.08 per share to date basic. Revenue of $19.5 million, up $12.3 million, or 172%, over Q2 2018 revenues of $7.1 million. same-store sales were up 23% for Q2 2019 versus Q2 2018. Gross profit margin percentage was 29.9% for Q2 2019 compared to 24.2% for Q2 2018. Store operating costs as a percentage of revenue have declined to 14% for Q2 2019 compared to 16.1% for Q2 2018. Corporate overhead as a percentage of revenue declined to 9.8% for Q2 2019, compared to 16.8% of revenue for Q2 2018. Completed a $12.8 million financing, all the company's strategic institutional investors participated in the oversubscribed offering, including lead investors Gotham Green Partners, Merida Capital Partners, and Navy Capital. In addition to the company's three strategic investors, JW Asset Funds also participated. The company had $18 million in cash and cash equivalents at June 30, 2019. As of June 30, 2019, the company had working capital of $29.6 million compared to working capital of $21.6 million at December 31, 2018. For the six-month period, the company acquired six stores, one in Denver, Colorado, Palm Springs, California, Reno, Nevada, and Manchester, New Hampshire, and two in Maine, and opened new store locations in Tulsa, Oklahoma, and Brewer, Maine. We appointed Bob Nardelli, former CEO of Home Depot, as our senior strategic advisor. With that, I'd like to turn the call over to our CFO, Monty Lammaretto, who will go into more details regarding our second quarter financials. Monty.