GrowGeneration Corp.

Hello, everyone, and welcome to Growth Generation's third quarter 2025 earnings conference call. My name is Joanna, and I will be your operator for today's call. At this time, participants are in a listen-only mode. Following prepared remarks, we will open the call to questions from analysts with instructions to be given at that time. This conference call is being recorded, and a replay of today's call will be available on the investor relations section of Growth Generation's website. I will now hand the call over to Phil Carlson with KCSA for introductions and the reading of the Safe Harbor Statement. Please go ahead.

Thank you and welcome everyone to Grow Generation's third quarter 2025 earnings results conference call. With us today are Darren Lampert, co-founder and chief executive officer, and Greg Sanders, chief financial officer of Grow Generation. The company's third quarter 2025 earnings press release was issued after the market closed today. A copy of this press release is available on the investor relations section of the Grow Generation website at ir.growgeneration.com. I would like to remind everyone that 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 of the forward-looking statements made today. During the call, we'll use some non-GAAP financial measures as we describe business performance. The SEC filing, as well as the earnings press release, which provide reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are all available on our website. Following prepared remarks, management will be happy to take your questions. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, please re-enter the queue, and we will take them as time allows. Now, I will hand the call over to Grow Generation's co-founder and CEO, Darren Lampert. Darren, please go ahead.

Thanks, Phil, and good afternoon, everyone. Thank you for joining us to review our third quarter 2025 results. Our third quarter marked an inflection point for Grow Generation. We delivered net sales of $47.3 million, up 15.4% sequentially, expanded gross margins to 27.2%, and returned to positive adjusted EBITDA of $1.3 million, a $3.7 million improvement from the same quarter last year. This performance reflects the successful execution of our restructuring plan, lowering operating expenses, improving gross margins, and shifting our revenue mix towards higher margin proprietary brands. What's even more encouraging is that this momentum is being driven by the quality of our revenue, not just volume. Proprietary brands grew to 31.6% of cultivation and gardening revenue compared to 23.8% a year ago. Our leading brands, Charcourt, Drip Hydro, The Harvest Company, Dialed In, and Power SI, all demonstrated strong performance. Charcourt grew more than 30% year over year, while Drip Hydro increased over 20%. These brands remain in the early stages of adoption, and we're expanding into new revenue channels and product extensions to position proprietary brands to achieve approximately 40% of cultivation and gardening revenue in 2026. On the cost side, we reduced store operating expenses by 27.8% and total operating expenses by 31.5% year over year. This operating discipline, combined with a stronger revenue mix, resulted in our first positive adjusted EBIT a quarter in several years. We also continue to optimize our retail footprint. During the quarter, we closed five stores, bringing our total to 24 locations. We expect to complete a small number of additional closures in the fourth quarter to focus on higher volume, higher margin markets, consistent with our goal of becoming a leaner, more efficient, brand-led organization positioned for profitable growth. At the same time, we completed over $7 million in cultivation infrastructure projects. These projects include lighting, fencing, fertigation, HVAC, irrigation, and automation systems, helping commercial and craft operators modernize existing facilities or build new ones. Demand will remain strong across both multi-state operators and craft cultivators, and we expect this business to remain a meaningful contributor for revenue going forward. Our MMI storage solution segment also delivered a second consecutive quarter of sequential growth, with 8.9 million in revenue. MMI continues to benefit from diversification into industrial, agriculture, and specialty end markets, and we expect steady growth from this segment in 2026. Strategically, we are broadening our reach beyond cannabis into larger specialty agriculture and controlled environmental markets. During the quarter, we began selling our brand into the independent garden center channel and relaunched the HarvestCo.com to serve greenhouse and specialty crop growers. In addition, we announced a distribution partnership with Aric Sales, expanding our wholesale and B2B reach into thousands of new retail stores across 32 states. This is a major step in our transition from a cannabis-focused retailer to a national controlled environment agricultural supplier. Furthermore, we're taking additional steps to increase our growth trajectory, including our recent entry into the home gardening market through our second quarter acquisition of Viagra. a domestic brand with distribution across retailers such as Amazon, the Home Depot, Walmart, Lowe's, and Tractor Supply. More importantly, it supplies us with a scalable platform to serve home gardeners and hobbyists, cultivators across multiple retail channels nationwide. We're also seeing strong adoption of our B2B Pro Portal by commercial and wholesale customers. Increasingly, these customers are moving their purchasing online where they have access to automated ordering, customer catalogs, and real-time inventory visibility. This improves order accuracy, reduces transaction costs, and drives recurring revenue. Another growth area for GrowGen involves further international expansion by entering new high-growth cultivation markets with growing numbers of hemp, and cannabis licenses. We are working to accomplish this through the distribution partnerships, such as a distribution agreement with V1 Solutions to support commercial sales across the European Union. We also recently launched our proprietary products in Costa Rica, one of Central America's most promising cultivation markets. By leveraging these strategic distribution partnerships, We can quickly scale with minimal capital investments to grow our brand presence in these new markets. With $48.3 million in cash and no debt, we have a strong balance sheet to support our inventory needs, infrastructure projects, and proprietary brand expansion. This financial strength positions us for sustainable and profitable growth. Looking ahead, we expect fourth quarter revenue of approximately 40 million. And as we move into 2026, we anticipate positive revenue growth as well as positive adjusted EBITDA. Our focus will be on driving proprietary brand mix towards 40% of cultivation and gardening sales, scaling B2B portal automation, and reoccurring commercial orders, expanding revenue across independent garden centers, greenhouse agriculture, specialty crops, and cannabis, and continuing cultivation infrastructure projects, an offering we are now branding as Grow Generation Build. The controlled environmental agriculture industry remains in the early stages of its growth cycle. We believe Grow Generation has substantial runway ahead and is well-positioned to lead this evolution with proprietary brands, infrastructure builds, and system integration, long-standing customer partnerships, a proven management team, supported by a strong balance sheet, and track record of execution. With that, I'll turn the call over to our CFO, Greg Sanders. Thank you, Darren, and good afternoon, everyone.