GrowGeneration Corp.

Hello everyone and welcome to Grow Generation's second quarter 2026 earnings conference call. My name is Melissa 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 Grow Generation's website. I will now hand the call over to Phil Carlson with KCSA strategic communication for introduction and the reading of the safe harbor statement. Please go ahead, Phil.

Thank you, operator, and welcome everyone to Grow Generation's second quarter 2026 earnings results conference call. For this today from Grow Generation are Darren Lampert, co-founder and chief executive officer, and Greg Sanders, chief financial officer. The company's second quarter 2026 earnings press release was issued after a close of market today. A copy of this press release is available on the investor relations section of the Grow Generation website at ir.growgeneration.com. I'd 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 Security 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 four 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 recommendations of non-GAAP financial measures to the most directly comparable GAAP measures, are all available on our website. Following the 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 Grow Generation's second quarter 2026 financial results and to discuss our outlook for the rest of 2026. I'm pleased to report that our sales momentum in early 2026 continued into the second quarter. This marks our third consecutive quarter of year-over-year revenue growth. Following the actions we have taken over the past few years as part of our larger strategy to transform ProGeneration into a commercial Proprietary Brand Driven Business This growth strategy is centered around three key priorities. Expanding our commercial platform, growing our proprietary brands, and maintaining a disciplined cost structure. Our expanded commercial B2B business is a core growth driver of our strategy. Through our digital B2B platform, GrowGenPro, We have strengthened our relationships with both single and multi-state operators, greenhouse growers, and many other commercial cultivation customers throughout North America. These customers recognize the value we provide, with many of them adopting our products and growing protocols into their operations. Another key component of our strategy is growing our proprietary brands across additional channels. Aside from building stronger brand loyalty, proprietary brand sales also represent higher margins, reoccurring consumable purchases, and create greater competitive differentiation for GroGen in the marketplace. Our efforts have been very successful as we continue to see increased adoption. Proprietary brands such as Charcore, Drip Hydro, The Harvest Company, Dialed In, and Power SI. With this strategy, we set certain goals for ourselves in 2026, including proprietary brand penetration, reaching 40% of cultivation and gardening revenue by year-end. Based on our performance to date, we have updated our full-year adjusted EBITDA goal and now expect to generate adjusted EBITDA in the range of $2 million to $3 million. This is significant for growth generation as it shows the progress we have already made as well as the ongoing evolution of our business as we set the bar higher in order to keep driving revenue growth, reduce costs, and improve margins. Now let's look at our second quarter results. We generated total revenue of $43.2 million. which was in line with our expectations and represents both sequential and year-over-year growth even as we operated with a smaller retail store footprint. We reported proprietary brand sales representing approximately 40% of cultivation and gardening revenue compared to 32% in the same period last year. So, we are already at our year-end target mix just halfway through the year. In addition to reaching this target, these results represent our progress in building a more focused, commercially driven, and profitable business. We have continued to transition our sales towards higher value, recovery consumable, proprietary branded products. Expanding proprietary brands is central to our margin expansion and long-term value creation strategy, and we are very pleased with our progress. Our MMI storage solution segment also delivered solid results this quarter, with $8.3 million in revenue. MMI continues to benefit from higher capital investment activity and its diversification into industrial, agricultural, and specialty end markets. We expect this segment will continue to generate steady growth throughout the remainder of 2026. All this has contributed to expanded margins. For the second quarter, we achieved gross profit margins of 28.5%, a sequential improvement of 310 basis points from 25.4% last quarter and compared to 28.3% last year. Turning to expenses for the quarter, we reduced store and other operating expenses by approximately 22% year over year. and Total Expenses by 13%. These results display the considerable benefits we have achieved from the increased efficiency and cost reduction initiatives that we have been implementing over the past several years. All of this contributed to GroGen achieving positive adjusted EBITDA for the second quarter. As I mentioned earlier, this is an important milestone for us. Aside from increased profitability, it demonstrates the value we have created through our strategic initiatives as we continue to transform ourselves into a stronger business with increased growth prospects. I'm not just talking about the operational improvements we've made. I'm also talking about our emphasis on revenue quality. We're growing higher margin sales as part of our revenue mix, particularly through our proprietary brands. also attaining positive adjusted EBITDA this quarter have now led us to reach even higher as we have raised our full year 2026 adjusted EBITDA goal to the range of $2 million to $3 million. As part of this strategy, we have also continued to maintain a strong balance sheet. Today, we possess one of the strongest balance sheets within our industry. This financial flexibility gives us a considerable competitive advantage as we seek further infrastructure projects and take steps to increase our proprietary grant expansion. At quarter end, with $41 million of cash while having no debt, we have the resources to keep investing in our growth initiatives while still maintaining disciplined capital allocation. This financial strength also supports our stock repurchase activity. During the second quarter, we repurchased 700,000 shares of common stock at an average price of $1.38 per share. Regarding our forward outlook for the third quarter of 2026, we anticipate revenue of between $44 million to $46 million. At the same time, we expect to generate positive adjusted EBITDA for the quarter. This gives us the confidence to upgrade are full-year 2026 guidance, which includes net revenue in the range of $162 million to $168 million and adjusted EBITDA in the range of $2 million to $3 million for the full year. Before I turn the call over to Greg, I want to give some perspective on the latest developments around Schedule III rescheduling for adult-use cannabis. Since our last earnings call, the ALJ concluded It's formal hearings. While our ruling is still pending, we are confident that regardless of timing, Rogen is well positioned to support increased investment activity from our customers. We believe there is no other organization better suited for this. With our growing portfolio of proprietary brands, infrastructure builds, and system integrations, longstanding customer partnerships, and our talented and seasoned management team. All of this is supported by our industry-leading balance sheet and proven track record of execution. That concludes my remarks. Now I'll turn the call over to our CFO, Greg Sanders.