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spk01: Good day ladies and gentlemen, thank you for standing by. Welcome to the Hydro Farm Holdings Group's second quarter 2021 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, August 12th, 2021. I would now like to turn the call over to Mr. Fitzhugh Taylor, Managing Director at ICR to begin.
spk08: Thank you, Stacey. Good afternoon. With me on the call today is Bill Kohler, Hydrofarm's Chairman and Chief Executive Officer. I'm John Lindemann, the company's Chief Financial Officer. By now, everyone should have access to our second quarter 2021 earnings release and Form 8K issued today after market close. These documents are available on the investor 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 what we expect. We refer all of you to our recent SEC filings for more detailed discussion of the risks that can impact our future operating results and financial condition. 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'd like to turn the call over to Bill Teller. Bill?
spk02: Thank you, Fitzhugh, and good afternoon, everyone. I'm pleased to report another quarter of strong growth in our business. We enjoyed growth across virtually all of our product lines, all of our geographies, including both new and mature markets. To briefly touch on this, we grew our top line by almost 47% and improved gross profit by over 65% year over year. More importantly, as our proprietary brands are becoming a larger part of our total sales, we benefited from this favorable sales mix and posted over 127% improvement in adjusted EBITDA and a 430 basis point increase in adjusted EBITDA margin to a very solid 12.1% in the quarter. We believe this result is evidence of our unique positioning as a leader in manufacturing and distributing differentiated branded hydroponic equipment supplies in the controlled environment agriculture market. To maintain our momentum going forward, we'll remain focused on our four key growth drivers. First, drive and increase the penetration of our proprietary brands inside our company. Again, these are the brands that we own and represent a key growth opportunity for us due to their higher margin profile. Second, develop strategic relationships to convert more brands into preferred brand status. These are brands that are primarily sold into the hydroponic channel through Hydrofarm. Third, drive our commercial presence by working with our MSOs and large commercial growers. And lastly, which is what I want to focus most of my comments on today, is our M&A strategy. that we believe will continue to create more opportunity to refine our portfolio and improve margin growth and innovation. Following our IPO in December of 2020, we began to reconfigure our portfolio and become a brand owner using our established distribution platform to reach customers. In Q2, we took our first steps toward this goal, but this is a multi-quarter process to buy, integrate, and build these great businesses. It's still very early days in our reconfiguration, but the early results are very encouraging. Specifically, our team has been very busy in the last few months, adding four impressive businesses to our portfolio since the beginning of the second quarter. In early May, we completed the acquisition of Heavy 16, a leading manufacturer and supplier of premium plant nutrients. As a trusted brand with a highly respected team and broader awareness, with availability in over 300 retail stores here in the US. Heavy 16 is an excellent business with a strong foundation of highly profitable proprietary nutrient offerings. In June, we completed the acquisition of another fantastic business, House and Garden. With their own strong product line of plant nutrients, they further strengthen our position in the nutrient category and complement our rapidly expanding portfolio of premium products. In addition, their expansive distribution network reaches 40 states and over 10 countries, and gives us a great opportunity to extend our global reach and market penetration. Subsequent to the end of the second quarter, we completed our third acquisition in Aurora Innovations, an Oregon-based supplier of organic soil, grow media, and nutrient products. Aurora's offerings provide Hydrofarm with its first organic, nutrient, and premium soil brands. In addition, we also gain new domestic manufacturing and distribution capabilities on the east and west coast in the U.S., and a peat moss harvesting operation in Canada. Lastly, last week, we successfully completed the acquisition of Canadian nutrient distributor and manufacturer Green Star Plant Products, a company that we have a long and profitable shared history. Green Star's product line includes Grotech, Gaia Green, EarthSafe, and super green plant nutrients, all of which we believe will further strengthen our lineup of high performance proprietary branded nutrient products. These businesses not only add proprietary offerings into nutrients and grow media categories, where we haven't historically had a strong contingent of our own brands, they also provide great recurring revenue at highly profitable rates and have had a positive impact on our P&L almost immediately. Not to mention they've added valuable manufacturing and distribution capabilities to our business. Let me quickly expand on this with some second quarter statistics. The consumable portion of our portfolio has now grown to approximately 69% up from 67% last year in our product mix. Second, over 68% of our sales now comes from proprietary and preferred compared to 65% previously. And lastly, these accomplishments are only enhanced because of the dedicated people behind it. They have allowed us to recruit many great new talents into Hydroform. I'd like to take this opportunity to welcome all the new team members from the companies we've acquired to the Hydroform family. Together, we can accomplish many great things. To summarize, we consider these businesses to be high growth, accretive, attractive margin profiles that will be accretive to our overall business. But more importantly, these transactions further solidify our position as the acquirer of choice in this highly fragmented and fast-growing industry. So while we're off to a good start in the M&A activities, we still have a lot of opportunities available to us and we'll continue to put our focus behind this strategy going forward. With that, let me shift gears and quickly update you on the investment in our infrastructure. As I've mentioned in the past, our distribution footprint is critical for our ability to better service a larger, long-term customer base and stay ahead of growth. When you couple the recent acquisitions in the past six months with the two distribution centers expected to be completed in Q3 of this year, we will have grown our combined distribution center and manufacturing footprints by approximately 70%. As we look ahead over the next few months, we'll be moving into two new distribution centers, one in Northern California and one in Southern California. In fact, we move into Southern California a bit this week. You may remember we also expanded our Portland, Oregon facility earlier this year. These new facilities are all larger and located in better areas logistically. Lastly, we're finalizing our plans to add an additional center for distribution in the next six to 12 months. If you'll recall, it was our goal to expand our distribution footprint by about 25% this year, and as you can see, we're well on our way to exceeding that goal. Finally, let me remind you, we're still in the early innings of a long progression to full legalization. It's still there over 60% of the U.S. population that resides in a state that does not have access to legal adult-use cannabis. I truly believe the legislation is at a tipping point, and the investments we are making in our infrastructure today will position us to serve the expected surge in adult-use cannabis demand. Before I turn it to John, let me reiterate how excited we are with the long-term growth potential of the CEA industry and the fact that Hydrofarm is uniquely expected to capitalize on that growth. To that end, we'll continue to grow our organic top line, execute on our proprietary preferred brand strategies, drive our commercial business, and capitalize on the many opportunities we have in M&A to build a strong portfolio of proprietary branded offerings. With that, I'll turn it over to John for a little more update on the financial results and important update on our 2021 guidance. John?
spk06: Thank you, Bill, and good afternoon, everyone. Net sales for the second quarter increased 46.7% to $133.8 million from $91.2 million in the prior year period. The increase in net sales was dominantly organic, volume-driven growth. Though the two acquisitions completed in the quarter, Heavy 16 and House & Garden, had a positive impact, as did one notable preferred brand. Once again, we experienced increased demand throughout all of our end markets and faster growth across our proprietary and preferred brands, which continue to outpace our peer distributed brands. Gross profit during the second quarter also increased by 65.5% to 29.6 million as compared to the year-ago period, while gross profit margin improved by 250 basis points to 22.1%. This was driven primarily due to a favorable mix shift towards proprietary and preferred branded products, which typically carry a higher natural profit margin than pure distributed brands. Selling general administrative expense increased to $27.3 million in the second quarter of 2021, compared to $12.8 million in the year-ago period. The increase in SG&A was primarily due to increased costs associated with the recent acquisition and integration activities, which accounted for approximately 70% of the total increase, while higher costs associated with supporting our public company status and long-term growth strategy made up the difference. Excluding acquisition and integration costs, share-based comp costs, and depreciation and amortization, SG&A was 14.5 million, or 10.8% in net sales in the quarter, versus 11.1, or 12.1% last year. So on this comparative basis, we realized operating leverage in the quarter once again. Reported net income attributable to common stockholders was $2.3 million, or $0.05 per diluted share in the second quarter, compared to $1.9 million, or $0.08 per diluted share last year. Weighted average diluted shares outstanding were approximately $42 million for the second quarter of 2021 and approximately $20.9 million for the prior year pre-IPO period. Similar to last quarter, we have calculated pro forma adjusted net income and applied pro forma weighted average diluted shares outstanding, as if the IPO had occurred at the beginning of January 2020, which is the earliest comparison period. On this basis, pro forma adjusted net income for the quarter was approximately $12.5 million, or $0.30 per pro forma diluted share, compared to a profit of $4 million or $0.12 per pro forma diluted share in the year-ago period. Lastly, adjusted EBITDA more than doubled to $16.2 million or 12.1% in net sales for the second quarter of 2021 from $7.1 million or 7.8% in net sales last year. Moving on to our balance sheet and overall liquidity position, as of June 30, 2021, We had $195.4 million in cash, cash equivalents and restricted cash, $50 million of available borrowing capacity under our existing credit agreement, and only $1.7 million in an aggregate amount of debt outstanding. And while a portion of the proceeds were received prior to the quarter end and therefore included in the $195.4 million number mentioned earlier, on July 19th, Subsequent to the end of the quarter, we completed the redemption of the outstanding investor warrants, raising approximately $54.8 million in net proceeds. As Bill noted earlier, we also completed the acquisition of Aurora and Green Star plant products subsequent to the quarter, which resulted in a combined cash outlay of approximately $218 million. As a result of these transactions, and as noted in today's press release, We are currently evaluating various debt financing options to continue to fuel our M&A strategy and overall continued growth. We will update you on our debt financing plans as soon as practical. Lastly, based on the continued strength in our overall business, as well as our acquisition activities to date, we are now updating our 2021 outlook. We're now expecting total company net sales growth of 45% to 50% for the 12-month period ending December 2021. and adjusted EBITDA of $55 million to $62 million for the same period. Please note that this outlook only captures partial year contributions of the four acquisitions completed between May and early August. On a pro forma combined full year basis, had we owned the acquisitions for the full year, the company would expect to generate between $565 million and $590 million of net sales and approximately 80 to 90 million of adjusted EBITDA. In closing, we remain excited about our long-term growth prospects and continued margin enhancement via internal initiatives as well as our M&A strategy. We see these initiatives already making an impact on our business, even as we begin lapping strong comparables from last year's third and fourth quarter. Lastly, I would also like to extend my welcome to all the new talents who have joined us in the past several months. as we now look forward to jointly executing our growth opportunities together. This concludes our prepared remarks, and we're now happy to answer any questions you might have. Operator, you want to open up the lines?
spk01: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. Your first question comes from Andrew Carter with Stiefel.
spk00: Hey, thanks. Good afternoon, guys. Hey, Andrew. Hey, I appreciate the guidance update today. And maybe I'm not sure if I had the acquisition contribution right in the quarter. But for the second half, I'm getting kind of at the midpoint kind of 5% kind of underlying organic growth. I guess could you kind of talk about kind of that step down and maybe what you're seeing through this first, I guess we're six weeks into the quarter. Anything you can help us with there? I'll stop there. Thanks.
spk02: Yeah, as we've been saying, as you start lapping the plus 60% growth numbers from Q3 and Q4 of last year, the percent changes are obviously going to get a little tighter. I think your 5% is way conservative there. And part of the challenge for us is, When an M&A comes in like a Heavy 16 or a House and Garden and it's fully incremental to us and we never distributed it before, it's easier to capture that. When an M&A like Green Star or Aurora comes in where we already distributed the brand, that essentially is really organic to our company. So it's not the same sort of, it's harder to tease that apart, right? We might pick up some sales outside of stuff that we didn't distribute for them before, but it's very difficult to pull all that apart. But I think you're Your 5% number is very conservative there. As far as how the quarter is progressing, we're pleased with where we sit as of Q3. I think there's a number of overall factors that are going on in the industry that have caused things to change trajectory a little bit, but we think it's primarily an isolated situation in a couple of places, and we're already starting to see things bounce back to the levels that we had been seeing back earlier in Q2. Overall, we feel good. Think you're a little, a little tight on the 5%, uh, for sure. And again, we've got that difficulty of peeling apart these brands that are already ours.
spk00: Fair enough. And I guess the second question, I appreciate the update on the portfolio transformation. A big aspect of the story has been, you know, the, the inventory demand 95 days, but through the acquisitions, you've bought a lot of higher margin businesses that were, you know, now, now you don't have to have that margin sitting there in inventory anymore. Can you kind of give us an update on kind of how the working capital demands have changed for the business? Because obviously there's more capital intensity on the CapEx side. Thanks.
spk02: Yeah. Working capital has been interesting for the whole industry as everybody has struggled to get reliable supply from all over the world, right? Most of the soil and grow media suppliers are behind. Many of the equipment suppliers in China are behind. Their lead times have been extending from what used to be six or eight weeks to now what are up to several months. So we've taken the strategy of lean into inventory, leverage the balance sheet towards inventory to be able to service the customers, right? And we didn't have a whole lot of control on a lot of the M&As as to what their inventories or level, what their inventory levels were. A couple of them were higher, a couple of them were lower. So it's not exactly a normalized time to evaluate inventory days. I think with the worldwide supply chain still being a bit altered from all the challenges over the last 18 months, we're still coming to what I would call to be a normalized level. John, you want to add to that?
spk06: Yeah, sure. I'll just chime in as well. Andrew, you're right. I mean, with the pickup of four manufacturing businesses, there is going to be a little bit of an incremental spend behind it. You see that to some extent in our call-out in the press release of a step-up in the CapEx that we're intending for this year to $8 to $10 million. But with respect to inventory and inventory turns, I think we might see it step up a tick or two, just in terms of a couple days relative to maybe what you've seen historically, really to enable sort of that raw material component of the overall manufacturing process, which we really didn't have present in our business before.
spk00: Thanks. I'll pass it on.
spk06: Thanks, Andrew.
spk01: Your next question, John Anderson with William Blair.
spk07: Hey, good afternoon and congratulations on the quarter and the acquisition. Thanks, John. Thank you. Question on the acquisitions themselves. You've handpicked certain businesses and brands here and made a series of acquisitions since the start of the second quarter. How should we think kind of in aggregate about the growth rate of these businesses going forward? Is the right way to think about it you know, these were brands that you saw as particularly attractive with higher than average growth rates in the marketplace. Thus, you know, you wanted to own them and make them proprietary. And then the second part of this acquisition question is, as you take on more proprietary brands or own brands, do you need to also maybe invest more in innovation and demand generation activities
spk02: relative to doing business in a preferred or distributed way thank you i know there's a lot there appreciate it that's right thanks uh yes to answer your last question first we are investing in innovation and marketing at the same time when we're buying businesses right it's a it's a lot quicker payback to drive innovation on your own products than it is to go out and buy companies all the time so we're doing both we're dialing up our marketing efforts uh frankly, to levels that we've never seen before. Historically, we weren't a huge marketing company, and still as a percent of sales, it's still going to be a fairly small number, but we believe strongly. I mean, my whole history, John's whole history, many of our leaders' histories have been around brand building through innovation and marketing. So yes, that's a key part of what we're doing. As to how we targeted the businesses that we've acquired, frankly, we had a profile of we always wanted to get more into consumable categories. We didn't have brand representation in grow media or nutrients. So that was a target. Then we wanted to find sort of the best available quality products that we thought had a role in the marketplace and played different roles in the marketplaces. And these brands all kind of fit together like that. And then, of course, the third opportunity has to be that these brands are willing and interested to sell at a particular time. And so those three things all came together on these first four businesses. And we feel very good about the portfolio that we've built. We've been heavily consumable-oriented so far. It doesn't mean we wouldn't look at a capital-type business or a durable-type business. That could be in our future as well. But right now, we're pleased to get our consumable side and our consumable brand portfolio built up. Super helpful.
spk07: One quick follow-up. I think at the time of the IPO, you had eight distribution centers across North America. Could you – and I can't recall how many manufacturing facilities, but could you refresh – those numbers today with the acquisitions, what the manufacturing and D.C. footprint look like, and why the investments, what kind of investments you may take.
spk02: On the D.C. side, eight was the number at the IPO. It is still eight. We've enlarged one, Portland, Oregon, and we're enlarging two more, Southern Cal and Northern Cal. We are looking for another facility or looking to open a facility in the southeast, southwest type of area to cover the demand down there. The two in Canada are still the two in Canada for now. As far as manufacturing, we did some what I would call light assembly work in one of our facilities in the U.S., but really our manufacturing acquisitions have been the Heavy, the House, the Aurora, and the Green Star. So now it gives us a cadre of four nutrient plants, two soil plants, a couple of worm casting facilities, and a peat manufacturing facility up in Canada. Thanks so much. Yep.
spk01: Next question, Peter Grom with UBS.
spk03: Hey, good afternoon, everyone. Hope you guys are all doing well. So I just wanted to follow up, follow up to Andrew's question, because I think it's pretty important. But could you maybe help us tease out what M&A contributed to the top line in both the quarter and in your guidance? I mean, at least directionally, because I think Last quarter, the math, you know, implied like a 26 to 36% organic revenue growth rate. So I think investors are trying to understand how much of a slowdown versus last quarter is actually embedded in this guidance, you know, if at all.
spk06: Yeah, no, let me chime in on that. Yeah, with respect to Q2, the quarter we just completed, you know, we had top line growth, as we mentioned, just using round numbers around 47%. I think I'd tell you about 900 basis points, so about 9% of that 47% was M&A growth, so contribution from house and garden, heavy 16 in the quarter. You know, as we think about our guidance, or maybe as you should think about our guidance of 45 to 50 year over year, which is an update from our prior quarter guidance, really, you know, inside of that is roughly 25 to 35% year over year growth. Again, this is annual guidance. year-over-year growth for what I would maybe call our legacy business, and approximately 15% to 20% of M&A growth. And I think if you kind of walk through the press releases for each of the acquisitions that we've completed up to this point, and I think in maybe all of those press releases, we may have had a 2021 full-year estimate. Obviously, we don't own these businesses for the full year. But I think if you work that math, it should roughly tell you and walk you through exactly what I just explained. And by the way, I think I would just comment, too, that that 25% to 35% year-over-year growth is pretty comparable to kind of what we called last quarter as well.
spk03: Okay, that's incredibly helpful. And then I had a bit of a longer-term question. question on the margin opportunity. I think most that are listening to this call, as the press releases have kind of come out this quarter, I would say I've been surprised at how high the implied EBITDA margins were in some of the assets you've acquired. And then in the release tonight, the pro forma EBITDA margin in the mid-teens is far greater than I think most anticipated, particularly more to think about 2022. So given you still have room for future acquisitions and likely operational efficiencies, I guess you know, how should investors really think about the long-term margin opportunity for this business and how quickly can you get there given what you've delivered so far?
spk02: Yeah, thank you. We've, you know, last year was a six, this year's proforma we just gave you is 15.2. And we think we're, you know, well on our way to having a, you know, a solid mid-teens kind of business here for the foreseeable future, you know, with upside. I mean, we now own four nutrient plants. We just hired a leader of manufacturing to help us think about productivity and, and optimization. We are, you know, getting scale out of our distribution centers. We've been, um, you know, growing and, you know, the growing challenges of becoming a new public company. We've spent a lot of money to do all of that. So we think there's, you know, we haven't even gotten to the productivity side of business. We're just trying to capture all the growth that's out there. And that's, what's exciting for us is that we're showing the kind of, you know, mid teens type of profitability, with incredible upside to go. So it's become a, I won't say it's a surprise to us. I think it happened quicker than we might have thought nine months ago or eight months ago when we did the IPO. But we clearly saw and felt like we could get to the mid-teens. We just didn't want all you guys to get ahead of us and try and run us out there too fast. So we're pleased with where it looks right now and think that we can keep going from here, both on the top line and the bottom line.
spk03: Great. Well, congrats again and best of luck.
spk02: Thank you. Thanks.
spk01: Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Next question comes from Kevin Merrick with Deutsche Bank.
spk04: Hi. Good afternoon, guys.
spk02: Hey, Kevin.
spk04: Maybe just another deal question. You know, sitting here after, you know, the four years completed in a matter of months, Is there a point at which you need to slow down and ensure the deals you've done are performing well and are effectively a part of the hydroform entity? Or do you have the bandwidth to kind of continue to go after deals?
spk02: Yeah, a very fair question. We talk a lot about this, right? It's particularly a bandwidth question around the financial integration. Many times we're buying family businesses that aren't up to the sophistication that we are. We've been able to put in external resources, internal resources. We've been hiring and adding things there. we aren't going to keep the pace of one a month. I'll promise you that. That's a bit aggressive, but also you can't time M&A when it becomes available, right? And we want to become aggressive, but not overly aggressive to do things. So you can expect us to stay on this track to doing more and more and more. But yeah, I think that the one a month pace is a little quick and we've been able to absorb it so far. And getting everything filed on time and feeling comfortable that we've got the right information and numbers. But it'll slow some, but we're still going to become an acquirer of choice and a person who rolls up this business and rolls up this industry, hopefully quite successfully.
spk04: Understood. That's helpful. Thank you. Maybe just one more. Sure. You know, realizing it's a bit early to be talking about 22, but just thinking about your guidance, some of the comp issues in the back half of this year, I'm curious if you have any first-bush thoughts about, you know, the industry or company growth prospects in 22, given some of those dynamics, you know, legalizations that are taking time to play out, et cetera.
spk02: Yeah, you know, it's been interesting to watch because that number I quoted is 60% of people that can't buy today. Well, a year ago that number was over 70, so a bunch of legislation has happened, but not much implementation has happened. So it's tricky to get ahead of this because the states have been very unpredictable in in implementing, right? And if we had a clear path on what, you know, New York, New Jersey, Virginia, Connecticut were going to do, it'd be easier to know. But right now, they're all sort of playing politics with each other and not really sure where it's going. And so we're cagey there. So we don't have a number yet. This is only halfway through our year, as you know. And so we're, you know, we're really focused on getting the M&As integrated, continue to drive innovation and organic growth. And we'll be out, you know, later this fall with, or in the fall with sort of our look for 2022.
spk06: And maybe the only thing I would add to reinforce is just, I mean, for sure the long-term math in this category is something that we remain very excited about. I mean, we're still, we believe, very much in the early innings. You know, we'll get a full year contribution from acquisitions next year. Hopefully we'll find a way to get another deal or two done over the next six to 12 months. And so, you know, I think we're going to be quite excited about 22, but no numbers just yet for you.
spk04: Got it. No, that's totally fair. Thanks very much, Apostle.
spk01: Next question, Bill Chappelle with Truist Securities.
spk05: Thanks. Good afternoon. Hey, Bill. Bill, you kind of alluded there were some kind of hiccups, but some issues in certain areas in the quarter, kind of implying that maybe revenue could have been even better and things have kind of ramped back up since we've started 3Q. Can you give us a little more color on that?
spk02: Yeah, no, I would say that Q2 was pretty solid. We came into July a little slower than we hoped, but You know, there's all kinds of external factors that are going on. It's, you know, heat waves in Oregon and big fires in California that cause these little blips. But we think that those are largely going to be a few-week thing and not really matter too much. But we think overall that we're still in a really good spot and the growth will be there.
spk05: Got it. And then one thing kind of struck is I think you said in the release that pricing only added about 3%, 4% to top-line growth. would you expect? Are you taking pricing with higher costs for your own brands where you would see that it'd be a much bigger number in the back half?
spk06: Yeah, I mean, look, Bill, we continue to reassess pricing on a quarterly basis. And obviously right now, just the overall supply environment, not just for us, but the whole industry and frankly other industries is very dynamic. So it's a little hard for us to take too much of a long game view on it right now. I think we're trying to manage a quarter to quarter. We've basically taken pricing in each of the last two or three quarters, not with the intent of really lifting margins from a pricing mechanism, but really maintaining margins and finding productivity. And our portfolio shift is a way to drive margins. So I think we'll continue to drive in that sort of quarterly cadence from here.
spk05: And the last one is on the M&A front. I mean, I understand that all the nutrient businesses are different, but I mean, Is there a point where you've filled out the nutrient side of the portfolio where you don't need more, and at some point you start to get negative reactions from the companies you're not acquiring and that you're distributing for?
spk02: No, it's certainly a conversation we have with them, but all of them know kind of how we fit. I think our share in nutrients, if you add all of our proprietary brands, even our distributed brands, We're probably still only a 15 share or so. It's a very large and fragmented category. So we think we've got some room to go there, but also we want to make sure we have good balance in the portfolio. So, you know, if we don't do a nutrient one next, that might make sense. But after that, we'd certainly look at some, if they're the right ones and fit a niche or a role that we could expand. Great.
spk05: Thanks so much, Nicola.
spk02: Thanks, Bill.
spk01: I will now turn the floor over to Bill Toller for Code
spk02: Terrific. Thank you, Stacey, and thank you all for being on the call today. We appreciate your interest in Hydrofarm and look forward to speaking with you down the road. Thanks a lot.
spk01: This concludes the teleconference. You may disconnect your lines at this time, and thank you for your participation.
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