Earnings Call: Q1 2021

May 13, 2021

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Growth Generation 4th Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. And the number 2. Thank you. Mr. Michael Salomon, you may begin your conference. Thank you. Good morning. My name is Michael Salomon, Co Founder and President At this time, I would like to welcome everyone to the GrowGeneration 4th Quarter and Full Year 2020 Earnings Conference Call. With me this morning is Darren Laport, our CEO, Co Founder Monty Lamirato, our CFO and Tony Sullivan, quarter, our Chief Operating Officer, who will all be participants on our call this morning. After our management remarks, there will be an analyst Q and A quarter. As always, we expect to make forward looking statements this morning, but I want to caution you that our actual results could differ materially from what we say here. Quarter. Such statements can be identified by terms such as believe, expect, intend, and may. You should not place undue reliance on quarter. Forward looking statements as actual results may differ materially from these forward looking statements. And we do not undertake any obligation to update quarter and any forward looking statements we make today. For more information about factors that may cause actual results to differ materially quarter. Please refer to the press release we issued yesterday, as well as risks and uncertainties included in the section under quarter. The caption Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations quarter and our annual report on Form 10 ks filed with the SEC and any subsequent Form 10 Qs and Form 8ks filed with the SEC. Following prepared remarks today, we will open the call for questions. Call. I also remind everyone that today's call is being recorded and an archived version will be available on our website later today. Quarter. The hydroponic industry that we serve has gone through monumental changes in 2020 2021. Quarter. Legislation is opening more states to grow more plants on the national level. All eyes are focused quarter on Washington as they seem to be making it easier for people to cultivate plants legally and obtain the ability to bank safely and nationally. Quarter. These actions will help contribute to statewide economies providing jobs and revenues going forward. Quarter. GrowGeneration sells products for the growers from small craft growers to large MSOs to build sustainable, standardized and profitable hydroponic operations. Our leadership in the industry comes from our relentless focus on customer service, quarter delivering end to end solutions for large commercial operators. We lead by having fully stocked hydroponic garden centers, quarter. Investments in technology, supply chain, omnichannel solutions and the employment of the largest contingents quarter of GrowPro Professionals. GrowGen's multi sales channel platform focused on the acquisitions quarter of the best of breed hydroponic operations and delivering end to end solutions for our commercial customers is working quarter as we continue to grow our business with a relentless focus on execution and financial discipline. Quarter. I will now turn the call over to Darren, who will present our full year 2020 results. Darren? Thank you, Michael. Quarter. Good morning, and welcome to our full year 2020 earnings call. Before I begin with my prepared remarks, quarter. I would like to thank each and every one of our staff and customers for their hard work, dedication and loyalty. Quarter. I also would like to take this time to thank Monty Lamoretto for his service, hard work and dedication quarter as our CFO, who is retiring at the end of Q1 2021. The company has announced Jeffrey Lascher as Monty's successor, quarter, who brings many years of public company CFO experience at both West Marine and Crocs. GrowGen has had a transformational year in 20 2020. As we continue to outpace our guidance, we are increasing fiscal year 2021 revenue guidance quarter to $415,000,000 to $430,000,000 and increasing adjusted EBITDA guidance for 2021 to $48,000,000 to $51,000,000 quarter. The company is providing Q1 2021 revenue and adjusted EBITDA guidance of $86,000,000 to $88,000,000 $9,000,000 to $9,500,000 respectively. The company is also increasing its guidance to reach over 60 quarter and over 100 garden centers by 2023. The company generated revenues of almost $200,000,000 in 2020, 143% increase year over year with a 63% increase in same store sales. Quarter. Adjusted EBITDA was $19,200,000 for full year 2020 versus $5,300,000 for full year 2019, quarter, an increase of 2 64% year over year or $0.44 per share basic for full year 2020 versus $0.16 per share basic for the same period last year. We added 14 new so far in 2020 to our now 52 hydroponic garden centers across 12 states. Quarter. Today, we have over 100,000 walk in customers per month to our hydroponic garden centers. Our e commerce channel grew over 123% quarter. And our commercial division, now over $49,000,000 in sales, grew at 188%. Our private label initiative quarter is now over now well over $10,000,000 in purchasing in the Q1 2021, and we plan to derive a projected 10% of revenue quarter earnings conference call. We acquired 2 of our industry's top selling product brands, and CharCorp. Both of these proprietary brands are expected to contribute well over $10,000,000 each in revenue in 20 21. In addition, on March 19, 2021, the company purchased the business to business ERP platform, quarter. Agron. Io, a leading agricultural portal that allows commercial growers to manage their purchasing and logistics in one platform. Quarter. Our best in class staff is now close to 600, with over 500 of our teammates experienced grow pros. Quarter. We have created the largest sales team of hydroponic product specialists in the country. Our steadfast focus on rapid quarter. Strategic growth in key markets, both organically and through acquisitions, has resulted in our record revenues and EBITDA. Quarter. With 800,000 square feet of retail and warehouse space, GrowGen is building the largest super hydroponic garden centers quarter in the U. S. That service commercial, retail and craft growers. Income from store operations was $32,300,000 for full year 20 20 versus $11,900,000 for the same period last year, an increase of 171% year over year. Quarter. Income from store operations as a percentage of revenue was 16.7% for the full year 2020 quarter compared to 14.9% for the same period last year. Our commercial revenues for the full year were $49,000,000 188% increase year over year, and our e commerce revenue finished 2020 at $10,600,000 an increase of 123%. Quarter. Our online division transactions were up almost 3 times to over 17,000 transactions compared to 6 1,300 in 2019 and attracted over 1,200,000 in unique visitors to growgeneration.com. Quarter. We continue to focus on margin expansion strategies that include furthering the deployment of more private label products, quarter acquisitions of proprietary product and driving more efficiency at the purchasing level as we continue to scale and grow top line revenue. Quarter. Store operating costs as a percentage of sales was 9.7% for full year 2020, quarter compared to 12.7% for the same period last year, an improvement of 24% year over year. Quarter. Corporate payroll and general and administrative expenses, excluding non cash operating expenses, as a percentage of revenue was 7% full year 2020 versus 8.5% for the same period last year. We expect new acquisitions and new store openings to continue through the remainder of 2021 and continue to drive growth and help us to achieve our planned 60 plus locations in 2021. Call. GrowGen has a tremendous team of essential employees who have made a commitment to our company and customers and I cannot be any prouder. Quarter. I'm inspired by their efforts and dedication that they have worked tirelessly to service our customers and communities. I quarter. I will now turn the call over to Tony Sullivan, our Chief Operating Officer, who will brief everyone on our key operating initiatives quarter executed in the full year 2020 and then to our CFO, Monty Lamoretto, who will provide more financial details on our full year 2020 year results. Tony? Thank you, Darren. We had another successful year with record financial results. We are very proud of our team's continued growth, execution and performance in the full year 2020. Quarter. As stated by Darren, we currently operate 52 of our locations across 12 states. Quarter. Our staff is now around 600 across our multiple divisions, hydroponic garden centers, e commerce and commercial. Quarter. Let's take a look at some key operating initiatives. We'll start with acquisitions and integrations. Quarter. In 2020, our company purchased a total of 14 locations and we have already purchased 14 locations in Q1 of 2021. The company also completed the acquisitions of 2 leading product companies, quarter. Canopy Crop Management in December of 2020 and March 12, 2021, quarter. Both companies support our important private label strategies moving forward. GrowGen has developed a SWAT team approach to acquisitions and integrations of companies we are purchasing. We have a very methodical approach that includes inventory valuation and analysis, onboarding personnel and point of service POS computer training. Our proven process allows us quarter to close multiple transactions in any given month and book revenue on the day of closing. Quarter. At the same time, we help those companies leverage and scale to increase sales and efficiencies quarter over time and become a part of our GrowGen model. We have developed a real estate and 2 year growth strategy quarter that is delivering multichannel supply chain for direct fulfillment, product transfers to any GrowGeneration location and Infrastructure to support our growing private label business. Our supply chain currently spans 800,000 Square Feet of Retail and Warehouse Space across 52 Locations and 12 States. Quarter. Today, we operate a distribution and fulfillment out of 600,000 square feet excuse me, 60,000 Square Feet location in Sacramento and 40,000 Square Feet in Tulsa, Oklahoma. Quarter. On March 9, we announced the addition of a total of 122,000 Square Feet, 52,000 Square Feet in Downtown Los Angeles and 70,000 Square Feet in Rancho Dominguez, California that will serve as distribution and fulfillment locations for the company. Quarter. We are in the process of building several additions additional locations that will serve as fulfillment centers quarter that include 25,000 Square Feet in Phoenix, Arizona 58,000 Square Feet in Medley, Florida quarter and we expect these locations to be opened by summer of 2021. Omnichannel and new website. Quarter. At growgeneration.com, we are currently testing buy online, pickup in store, pick, pack and ship and curbside Pickup Solutions as we wrap up the final development and launch of our new site. Quarter. In 2020, GrowGeneration dotcom had 17,000 transactions versus 6,300 in 2019 quarter and attracted over 1,200,000 unique visitors. In addition, as stated earlier, We just completed the acquisition of agron. Io, a dedicated B2B site quarter to better serve our rapidly growing commercial base. Let's take a look at private label. Quarter. Our newest product offerings are exceeding expectations and our expansion is well underway, with customers quarter. Purchasing over $10,000,000 in private label purchases in the Q1 of 2021, quarter. We have developed private label products that now include ion lighting, sun leaves powder nutrients and Additive line, optimum bulbs, blueprint controllers and timers, grow excess pots and containers, Harvest Edge pruners, trellis and other garden accessories. Our proprietary brands now include quarter. Power SI and a line of premium cocoa products that will all add to our private label offerings. SKU Rationalization and Store Planogram project. As a retailer, both online and offline, quarter. SKU rationalization and store planning remain and are constant source of focus and improvement. Quarter. We have selected one of the industry's top partners in the space and we anticipate significant learnings quarter and data to improve our inventory turn, optimization, profitability and in store consistency. Quarter. We have 16 product departments and we have redone all of our major categories, subcategories quarter to ensure that we have the best analysis and visibility moving forward. Our mission as a company is to offer the widest selection and the best of breed hydroponic products in the market so that GrowGen becomes the best 1 stop shopping destination for all types of growers. And at this time, I'm going to turn it over to Monty Lamirato quarter to give our financial highlights. As Darren previously announced, net revenue for the full year 2020 was approximately $193,000,000 compared to approximately $80,000,000 an increase of 143%. Quarter. The increase in revenues is due to 1, the addition of 14 new retail stores opened or acquired during 2020, quarter for which revenues were $31,000,000 2, 11 stores opened or acquired at various times during 2019 quarter that were open for all of 2020, which had an increase in revenues of $51,000,000 3, same store sales Increased 63% comparing 2020 to 2019, quarter, which had an increase in revenues of $28,000,000 and 4, an increase in our e commerce sales quarter of $5,900,000 from 2019 to 2020 and then revenues from our Canopy Crop recent purchase in December of 2019 of $300,000 Gross profit was $51,000,000 quarter for the year ended December 31, 2020, as compared to $22,000,000 for the year ended December 31, 2019, quarter, an increase of $29,000,000 or 132%. Gross profit as a percentage of sales was 26.4% quarter for the year ended December 31, 2020 compared to 27.6% for the year ended December 31, 2019. Quarter. The slight decrease in gross profit margin percentage in 2020 was due to a greater percentage of commercial and e commerce revenues quarter as a percentage of total revenue, both of which have lower margins than in retail sales. Commercial and e quarter. Commerce represented 31% of all revenues for the year ended December 31, 2020 compared to 28% quarter of all revenues for the year ended December 31, 2019. Operating expenses are comprised of quarter. Store operations, primarily payroll, rent and utilities and corporate overhead. Store operating costs were approximately quarter 2018,700,000 for the year ended December 31, 2020, and approximately 10,100,000 quarter. For the year ended December 31, 2019, an increase of approximately $8,600,000 quarter or 85%. The increase in store operating cost was directly attributable to 1, quarter. The addition of 14 new retail stores opened or acquired in 2020 to 11 stores opened or acquired at various times during 2019 that were opened for all of 2020. Quarter. The addition of these stores, as discussed above in the revenue section, were the primary reason for the revenue for the increase in store operating costs. Quarter. Store operating revenues were 9.7% for the year ended December 31, 2020, quarter compared to 12.7% for the year ended December 31, 2019, a 24% reduction. Quarter. Corporate overhead comprised of general administrative costs, share based compensation, depreciation and amortization quarter. Corporate salaries was approximately $23,900,000 for the year ended December 31, 2020, quarter compared to approximately $10,300,000 for the year ended December 31, 2019. Corporate overhead was 12.4 percent of revenues quarter ended December 31, 2020, 13% for the year ended December 31, 2019. Quarter. Corporate overhead, excluding noncash share based compensation, depreciation and amortization, was 7% of revenues quarter for 2020 compared to 8.5% of revenues for 2019. Quarter. Net income for the year ended December 31, 2020, was approximately $5,300,000 compared to net income of approximately $1,300,000 quarter for the year ended December 31, 2019, an increase of approximately $4,000,000 Net income for 2020 quarter compared to 2019 was primarily impacted by a 142% increase in revenues, quarter. Offset slightly by an increase in cost of goods sold, store operating costs as a percentage of revenues was 9.7% in 2020 quarter compared to 12.7 percent in 2019, offsetting the increase in cost of goods sold. Quarter. Store income as a percentage of revenue increased from 14.9% in 2019 to 16.7% quarter revenues in 2020. Income from store operations increased $20,000,000 from $11,900,000 in 2019 to $32,300,000 in 2020. Corporate overhead, including noncash costs, quarter. Increased $13,600,000 from $10,300,000 in 20 19. In addition, net income quarter in 2020 was impacted by the provision for income taxes of approximately $3,300,000 quarter for which there was no provision for income taxes in 2019. The company had significant operating loss carryforwards from prior years, quarter, which was used to offset taxable income in 2019, thus resulting in no provision for income taxes. Quarter. Adjusted EBITDA, dollars 19,200,000 for 20.20 or $0.44 per share basic quarter compared to $5,300,000 for 20.19 or $0.16 per share basic. Quarter. As of December 31, we had working capital of approximately $223,000,000 The increase in working capital from December 31, 2019 to December 31, 2020 was approximately 190 $4,000,000 and was primarily due to the net proceeds from the sale of common stock of $207,000,000 quarter and exercise of warrants totaling approximately $3,800,000 On December 31, 2020, week. We had cash and cash equivalents of approximately $178,000,000 I would now like to turn the call back over to Darren for some concluding remarks before the Q and A. Thank you, Monty. GrowGeneration recorded a record year of increased revenue, quarter and we achieved record adjusted earnings. We believe our company has now built the foundation for tremendous growth for the next several years to come. Quarter. Our store acquisitions and new store openings continue to drive growth. As the stores we continue to deliver double digit same store sales results year over year, quarter. We plan to own and operate over 60 locations during the year 2021. We plan to break the 100 store mark by 2023. Quarter. Today, we own and operate 50 4, including our 2 LA locations currently under development. Quarter. GrowGeneration has built a national scalable supply chain for the agricultural and cannabis industry. Quarter. Our leadership position is driven through our corporate mission statement to be the largest chain of hydroponic garden centers in North America. Quarter. We continue to invest in our supply chain and technology, creating more efficiencies across all departments, providing our customers with the product they want, quarter when they want it and when they need it. We look forward to continuing to provide guidance as need be, and we are excited to share our successes with our shareholders, quarter management team and partners. Now we would like to turn the call over to analysts for questions. Quarter. Thank you. Ladies and gentlemen, we will now begin the question and answer session. First question comes from Brian Nagel at Oppenheimer. Please Go ahead. Good morning. Congratulations on a great year and quarter, really well done. So, Monty, best of luck in your retirement. Thank you. Appreciate it. I'm looking forward to it. Quarter. It's been a pleasure. So a few questions, guys. I mean, first, clearly, in last night's release, you lifted 2021 sales guidance quarter. Substantially, and this is after several revisions higher or at least few revisions higher lately. Just to understand better, as you think about that guidance, Can you help us understand kind of the composition between a more optimistic view on organic growth versus acquisitions? Yes, Brian, this is Darren. We came out of last year At about a $280,000,000 run rate out of 2020. I mean, right now, we're forecasting same store sales in the high teens to 'twenty. Quarter. This year, we have successfully purchased $75,000,000 of stores and products, and that's on a 12 year that's on a 12 month basis. So right now, you're seeing us run rate right now anywhere from $390,000,000 to about $400,000,000 So within our within $15,000,000 to $430,000,000 includes a few more acquisitions. We still believe that we're on pace quarter for more than a few acquisitions, certainly a couple more product acquisitions. So as we continue to grow this business, continue to scale quarter and continue to increase store counts and build out some stores. We do believe guidance will be going higher this year. We're still taking, as we always do, a conservative approach quarter. Until we do close acquisitions and get these stores open and see how the integration process is going With the 14 stores that we've added to our portfolio this year. That's great. Very helpful. Quarter. Then the second question also with regard to guidance. So if I did the math correct, your the sales and adjusted EBITDA guidance applies for 21 times applies or quarter. Suggests EBITDA margin north of 11.5%. So I mean recognizing you haven't given longer term guidance, but how should we think about quarter. Where that margin could ultimately go and maybe more importantly, what are the key levers behind gains from the 11.5? Quarter. One thing we look at right now, Brian, is our private label. Private label will drive margin expansion. We are forecasting 10% this year. Quarter. Like every company you're seeing in the retail space, there's certainly congestion at ports right now. We have $5,000,000 to $10,000,000 of products sitting at the ports right now. Quarter. We've had a wonderful adoption in the Q1 of our private label. But again, products are sitting at ports quarter and we feel 100% comfortable with our guidance, which is quarter. It's really equating to over $40,000,000 of private label products this year. As we told Wall Street, margins on private label products are in excess of 50% right now. Quarter. So we do believe it will be driving a few base about 200 basis points on to margins this year. And we do believe as GrowGen continues to scale private label. It will continue to scale margins. I appreciate all the color. Congratulations. Best of luck here. Quarter. I'll turn it over to Scott. Thanks, Brad. Next question comes from Mark Smith at Lake Street Capital. Please go ahead. Quarter. Hi, guys. I wanted to talk a little bit about the recent acquisition of the AGRAM business. Can you walk us quarter. I'm going to turn this over to Michael. Yes, Agron was an acquisition, Mark, To basically provide the commercial customer a portal to optimize their planning, purchasing and forecasting quarter. For their supply chain, we realized very early on that the commercial customer needs a different curation of product. They need to be handled quarter. At a much higher level from a customer service perspective, it's different sizes of products, different types of products. What we said in our release is that we expect quarter. This year for Agron to contribute about $20,000,000 in additional accretive revenue, but it's going to bring so much more to the company. It's a technology platform. It's in our ERP platform. It's giving more transparency to our commercial customers quarter. On their purchases tracking history of what they're buying, accounting, invoicing. So it's a real quarter ERP platform that has been successfully deployed for many years. And we think under GrowGen's management quarter and strategies that we've already employed in the division. The integration of this technology with our quarter. Tremendous growth in our commercial division is going to be really powerful. So we see we saw this as a strategic acquisition quarter. In addition to the accretiveness of the revenue that Agron brings to the company. Okay. Quarter. And then as we look at growth, you guys have done a great job on acquisitions here in the Q1. Can you talk about organic store openings in 2021, maybe what you have from leases signed right now or how many stores maybe you expect to open quarter this year. Currently, right now, we're working on building out 2 distribution hubretail stores commercial fulfillment quarter. In L. A, one is Downtown L. A, which is about 55,000 square feet, and the other one is up in Long Beach, which is 70,000 square feet. Quarter. We look for these two operations to be these two warehouse operations to be operational summertime. Quarter. We are also building out right now Miami, Arizona and also Brewer, Maine. These are existing locations that we are moving into larger headquarters. Quarter. We will be signing leases in the next few months in the New Jersey area and also in the Mississippi area quarter and also in Illinois. So that's really what we're targeting this year. We're still waiting on clarification from New York as everyone has been reading. Quarter. New York is on the verge of going adult use. But once again, when states go adult use, quarter. There is an extremely long lead time before licenses are issued, before the laws are written. You're seeing that in New Jersey right now. You're seeing it in South Dakota, Mississippi. Quarter. When laws change? It could be up to 2 years before you see plants in the ground and building starting. Quarter. So the one thing from GrowGen, we take an extremely conservative approach. We will not build stores until we understand the licensing within the given states. Quarter. The amount of licensing that are given out, whether it's craft licensing, whether it's home grown rules. So we will know much quarter. In the next 90 days, we do believe in New Jersey. New Jersey right now has 12 licenses on the medical side. They're talking right now an additional 24 licenses with Craft Licensing, but still looking for a little more clarification and some ink quarter. On the bill that's going to end up into law. Okay, great. And then the last one for me. I just want to clarify on private label quarter sales. Kind of your are you expecting 10% kind of private label mix this year? We are, and we do believe that's going to be the bottom number of it. The exciting part for GrowGen right now, quarter. Our private label sales, we will be our 2nd largest distributor this year, manufacturer. So we do believe that GrowGen sales, quarter. We will be the 2nd leading product suite that we sell this year. So as our reliance upon some of our for the Q4. We were at 51% in 2019. We dropped to 41% in 2020. And we see that mix dropping into low to mid-30s this year. So we're quite excited about that. We think it's a huge move in the right direction for GrowGen becoming more reliant upon GrowGen and the distribution and manufacturing sectors out there. Excellent. Sounds great. Thank you, guys. Quarter. Thank you, Mark. Next question comes from Andrew Carter at Stifel. Please go ahead. Hey, quarter. I wanted to start off and kind of circle in on you mentioned the folks at the port, it's kind of a pretty honors input cost inflation environment. You quarter. Got a good position in the value chain to absorb it, but I wanted to know how you're thinking about that first as a headwind. I don't know if manufacturers are trying to pass along pricing. Quarter. Is it an opportunity for private label? And do you see any risk of potentially not being able to fulfill demand, whether it be getting boats out of China or just scarce quarter. Andrew, one of the things we're seeing in the U. S. We're seeing a lot of growth disruption and supply chain disruption has been a positive quarter. We have such a first leader position in this industry that we have gained a tremendous amount of customers during the port congestion and COVID, because GrowGen has approximately $80,000,000 of inventory at its warehouses. We can ship anywhere in the country. We have distribution around the country. So what's starting to happen right now is this as this industry evolves quarter from the small home grow really into big ag. GrowGen is the group that is 100% capable of servicing each and every grower out there. We've gotten ahead of port disruptions. We've gotten ahead of COVID. Quarter. Our warehouses are stocked, and we understand product, and we have relationships with every vendor out in the country right now. Quarter. So for us, even though we're seeing port disruption on our private label products coming in, we do have we got ahead of it. We have a tremendous amount coming in at the start of 2021. So we're pretty confident quarter in our product suite right now, and we are 100% capable of servicing each and every one of our customers. As quarter. Again, inflation with shipping, we are seeing it and we are passing it along. We are eating some of it. Quarter. We feel 100% with our margin guidance and guidance for 2021 right now. Got you. And then kind of speaking to you laid out kind of EBITDA. Quarter. How should we be thinking about kind of the free cash flow for the store? I mean, there's not too many new store openings. It looks like it's more upgrades, maybe more maintenance. Quarter. I know that working capital consistently come down for you guys as you've leveraged the national network. Any kind of puts and takes of how we should think in free cash flow for the year? Thanks. Quarter. Well, we've been I mean, in all of our acquisitions so far, quarter. We've been very successful in increasing the amount of revenues that process through each store. Quarter. And commercial sales have a large component of that. In addition, we've been able to increase the margins Through our purchasing power, which increases every year, every month as we continue to purchase more stores, quarter. Our purchasing power gives us better opportunities at better pricing, which of course flows right to each and every store, quarter, which improves our cash free cash flow and then improves our margins, which affects our cash flow. Quarter. And you're starting to see as you see, same store sales are up significantly quarter without an increase incremental increase in store operating costs. So we're getting tremendous leverage quarter. The revenues that are being driven through the stores without a substantial in any way substantial increase quarter and the normal operating costs of a store. So the revenue, the operating income from store operations quarter as a percentage of revenues continues to improve. Thanks. I'll pass it on. Quarter. Next question comes from Eric De L'Oreal at Craig Hallum Capital Group. Please go ahead. Quarter. Great. Thanks for taking my questions, guys. So I wanted to focus in on these on the impact of these larger stores for a moment. Quarter. Can you talk about how we should expect those to impact gross and EBITDA margins? Obviously, on the revenue side, you should get quarter. A nice lift, just with the larger footprint, but wondering if you could comment on the cost side of things compared to your broader portfolio? Quarter. Yes. Eric, we see it to be similar. We opened Tulsa, Oklahoma a year ago. Quarter. 1st year in Tulsa, Oklahoma did in excess of $15,000,000 in business, really with margins in the high 20s. Quarter. So we see no difference from any of our distribution hubs that we're opening. Certainly, the cost of building these hubs are incrementally more than building a 10,000 to 20,000 Square Foot Up. But on the profitability side of it, between distribution, commercial fulfillment, online fulfillment And also store operating. We believe that these companies will be as profitable, not more than our smaller stores. Yes. Okay, great. And then good to see the progress on the continue on the private label front and quarter. A pretty strong guide on that front as well. You mentioned more product acquisitions to come. Can you help us understand sort of how you look at quarter. Any specific categories you're targeting or avoiding and any ones that you're looking Perhaps provide a bit more of a margin lift than others? Thanks. Yes, Eric, we bought Charport and Power SI quarter. As we've announced, these are great additions to our private label strategies. They're proprietary products. These are products that have been in the environment, the growing environment, and they work. They're disruptive in a lot of ways in terms of their performance. Quarter. The unique part of GrowGen is that we can see sales trends before the rest of the market can. And we could use this data quarter to make strategic acquisitions of these products. So we're leveraging the scale of GrowGen. Quarter. And because we're in 52 locations across 12 states, we see different environments. We see what's working. Quarter. And we can take advantage of that from an acquisition strategy perspective. That's exactly what we did with Power SI, quarter. Exactly what we did with Charcor. We saw these 2 products, start to really grow within the portfolio of GrowGen stores. Quarter. And we said these are very interesting trends, and we identified them as really products that would be great additions to our private label strategies. Quarter. So we're able to leverage data to make really great decisions on which products we're going to go after from an acquisition perspective. Quarter. Thank you. The next question comes from Mike Baker at D. A. Davidson. Please go ahead. Thanks, Scott. So I wanted to ask one sort of one micro related question and I'll ask them both at the same time. From the bigger picture standpoint, you talked about more licenses, as an example, in New Jersey. Can you just quarter. Talk about what you see in terms of states adding, not just more states adding the ability for these products, but quarter. Actually adding more licenses to be a little bit more equitable from a social dynamic and what you're seeing there and how that impacts you. Quarter. And then from a company specific standpoint, I wanted to ask about your online business, about 6% of sales now, and I think it was actually even down as a percent of sales quarter. But you are making some changes to the website. How do you think about your online penetration going forward? How important quarter. Do you think that will be or is this more of a retail concept rather than an online concept? Thanks. This is Darren. I'll start off and then I'll pass it to Michael quarter for the online portion of it. It's our belief as you're seeing sea change in laws around the country, quarter. You start looking into the MORE Act and certainly some of the rumblings from the governors around the country. It's GrowGen's belief that you'll see more open licensing around quarter. As you're seeing out west, as you're seeing in Oklahoma, some of the proposed laws coming out of Mississippi, we do believe you'll see much more craft growing going around the Street. You'll see licensing opening up with certainly federal legislation changes. Quarter. We are of a belief this year, you certainly will see the Safe Act. We certainly have fingers crossed for a little more than that. Quarter. But we do believe from listening to from New Jersey, New York and certainly other states that you'll see more opening up of licensing. So you're going to see more growing, which is more business for GrowGen. Quarter. One of the interesting parts right now, Michael, what you're seeing, you're seeing a $20,000,000,000 cannabis business that quarter. The proponents are stating it will be $100,000,000,000 by the end of 2,030. So you're talking quarter over the next 9 years. So if you equate that to GrowGen, which is certainly growing much quicker than the markets, you're going to see a really bright decade for GrowGen. Quarter. When you look back 3 years ago, coming out of 2018, GrowGen was a $30,000,000 business. You're looking right now at guidance this year of 4.15 to 4.30. And again, with some more acquisitions and a little more clarity from states out there, those numbers probably will be going up. Quarter. So you're seeing almost 14x in rev in 3 years. And this isn't an industry right now that certainly has a lot of rules and regulations in it. Quarter. So when we look to our side of the business, we have such a first mover advantage over the other stores, over the smaller stores out there. Quarter. When you're looking at the other side of the business, the GrowGeneration, there's tremendous competition. Laws certainly take much longer to change. So GrowGen can get to any new state within 3 to 6 months of laws changing or something that we feel more comfortable with. Quarter. So we see such tremendous growth from GrowGen. And the other part that you're starting to see right now is that this industry is changing. This is going it's just a Controlled Environmental Act. You're seeing indoor growing, you're seeing technology solutions, you're seeing that GrowGen Understand the solutions, understands how to build out facilities. The days of these small hydroponic stores are going away. Quarter. This is big technology. This is solution providing. So it's twofold. 1, we build the facilities, help build the facilities and out the facilities, quarter. But then we service the facilities. There's changing products. There's more energy efficiency, water efficiency. Quarter. Growing hydroponically indoors, you're saving 90% of water usage. So what you're seeing right now is really the emergence of new industry. It's controlled environmental act. It's technology based. So the days of looking at GrowGen as a retail store, those days are We're a solution provider right now. We understand the industry. This is a new breed, quarter. And we're excited to be the leader of it. And we see tremendous change on the technology sides coming out quarter. As this industry scales, we also believe it's going to scale and to urban growing, which you heard AppHarvest speaking the other day. Quarter. Growing out these facilities is, it's not for the faint of heart. It's complicated and growth technology and the staff to do it. Quarter. With that, I'm going to pass it over to Michael to get into the online side of it. Yes, Michael. We're building a brand. We are the destination for quarter for hydroponic equipment. And it's evidenced by the amount of traffic our website is getting. We attracted 1,200,000 unique visitors. Quarter. We transacted from 6,300 transactions last year to 17,000. And that website also has influenced quarter. The amount of walk ins, as Darren reported, we're now at over 100,000 walk ins per month to a GrowGeneration location. Quarter. The strategy for our online is omnichannel. We're building the symbiotic relationship between the online transactions And our stores. So it's an integrated solution. It's an omnichannel solution, giving our customers optionality. Quarter. If they want to order online, great. We will drop ship it right to their growth. If they want to order online and pick it up at any one of our locations, great. Quarter. We give our customers that capability as well. But it's about giving customers the options on how they want to interact with the company. Quarter. And we're certainly giving our customers flexibility to transact in any way that they desire to transact with the company. Quarter. Further, we identified Aggron as an acquisition because we realized that quarter. Large commercial cultivators purchased differently. It's a business to business platform. It's a different curation of product. Quarter. And they had a really good platform that we felt we could build upon and really enhance it quarter with our commercial operations. So that's a separate online strategy, which we're going to be integrating quarter and taking that platform on and growing it from where they are today and bringing our commercial division and integrating quarter to those 2 entities. But it's really about building a brand and giving customers optionality on how they want to transact with the company. Yes, that makes sense. And thank you for quarter. Those are very complete answers. One thing I did want to follow-up with on Darren and you sort of touched on it. I think it's really interesting. So More of a plane or I guess I'll try to weave it into a question. But the idea that it's not just growth in the cannabis market, but hydroponics within the cannabis market that can help drive your total addressable market. So I guess the question to turn into a question, any idea of quarter. The share of cannabis that is done through hydroponics right now and what that could go to over time? Thanks. Quarter. Michael, there's so many different ways to look at it. I mean, if you want to equate it to the wine and spirit markets, the wine and spirits market is almost $1,000,000,000,000 market right now, quarter. Still growing after prohibition. So we're in 12 states right now. We have 38 states to still build out. We still have work to do in existing states. So really when you're looking at GrowGen's portfolio right now, 400 and quarter. It's $25,000,000 kind of the midpoint of range this year. That's in 12 states. We do believe quarter. That the East Coast will mimic the West Coast one of these days with tremendous, tremendous opportunities. And what we do see right now quarter. New states for GrowGener states that we will dominate and control. We're right now the 12 states we're in, we're in states that are mature states quarter with much competition. We're buying best of breed competition, but there's competition. But new states that we move into, we will be the clear leader in and every one of those states. But we also do believe that as this industry continues to grow, both from the cannabis side of it quarter. And also the gardening side of it and the urban growth side of it. We think we'll be a tremendous leader in that side of the industry also. Quarter. As we all know right now, climate control. I mean, right now, climates are changing. Growing outdoors is becoming more difficult in certain states. Quarter. There's water issues in California as it always been. When you go over and look in Europe right now, they're growing much more indoors than outdoors. This greenhouse is Strong all over, you know, Holland and everywhere else. You're not seeing that back here. But when you look at some of the weather changes even this year, go look at Texas, year. Look at the fires in California. There's going to be sustainability issues going on a go forward basis. And we do believe quarter. When you look at this controlled environmental agricultural industry, it's just started. This is a new industry. No one ever heard of this. No one heard of this industry before. Quarter. But building out sustainable greenhouses, you're talking airflow, you're talking fertigation systems, quarter. You're talking benching systems, lighting systems. It's complicated and it's quarter. Certainly, we're a solution provider. We understand it. And that's why we're hiring best of breed individuals to work at GrowGen. Quarter. Our staff right now were 600 strong. We've had no turnover at GrowGen. This we're building a company for the future. Quarter. We're investing in building a scalable iconic brand right now. People know GrowGen, and it's just starting. People know it and people are asking quarter basis. We get calls on a daily basis to open stores in different states, open stores in different parts of states. Guys, listen, I got to travel an hour and a half, 2 hours to get to a GrowGen store. Can you open a store please by us? So when we look through this decade, quarter. We believe there's going to be hundreds of GrowGen stores around. We're going to be a gardening store. We're going to be a solution for anyone that wants to grow a plant, quarter. Whether it's cannabis or whether it's fruits and vegetables, we just finished an extremely interesting customer segmentation to see what our customers want and what they're buying. Quarter. And what we came out of this is our cannabis growers are also buying products to grow plants and vegetables at their homes. Anyone that grows cannabis quarter. It's also growing plants and they're using the same products. So we see such tremendous synergies between some of the products that our cannabis Growers are using that will also be used into the home gardening industry. Quarter. Yes. I appreciate all the color. That's a very complete answer. Appreciate it. Thank you. You're welcome. Quarter. Next question comes from Scott Fortune at ROTH Capital Partners. Please go ahead. Yes, good morning. Thank you for question. Can you provide a little color on the M and A transaction side, kind of what type of deals you're still quarter. Are there more and more independent mom and shops looking to sell and the valuations there? Just kind of continue to see as acquisitions play a big part in growing forward kind of evaluations or what type of Deals you're seeing from that standpoint. Yes, Scott, we see the next 2 years certainly on the acquisition front and that quarter. Certainly, we'll slow after that. We see right now another couple of $100,000,000 of acquisitions in our pipeline that we will be looking to complete over the next 2 years. Quarter. But after that, you'll see much more greenfielding from GrowGen. Most of the acquisitions that you will see from GrowGen are going to be in the existing 12 states that we are in, quarter. We'll continue to build out those portfolios in those states. But on a go forward basis, when you go into 2023, 2024, It's going to be greenfielding state after state building out solutions for the growers in the individual states coming on board. Quarter. As we continue to as our same store sales continue to grow state by state in the existing 12 states we're in. Okay. No, I appreciate that. And then to kind of expand upon the last question a little bit. Your quarter. Commercial and ecom is about 30% of the business. It's only moved up a little bit. It sounds like that will stay flat. But quarter. Are you seeing more vertical farming on the technology side? You mentioned that it seems that interstate commerce comes on board percent. And these larger commercial growers will look to grow outside, but they all need more indoor facilities. They're more high quality consistent growth from that endpoint. Can you talk to us on the next technology generation of vertical farming, stackable units, LED, kind of the technology that's being adopted? Yes. We're putting together, Scott, end to end solutions for all types of vertical farming, whether it's cannabis or produce, agricultural vertical farming. The technologies quarter. And the products that we offer are certainly applicable across both of those vertical markets. And it really starts with lighting, quarter. Then it goes to vertical benching, control systems, as Darren mentioned. This whole new industry, this technology of controlled environmental ag, that's what GrowGen delivers as a solution provider. Fertigation, quarter. Dosing, environmental control, controlling the inputs to go quarter standardization, creating profitable growth for our partners. That's what GrowGen delivers quarter. Day in and day out, and we do that today. And we're looking at technology. We're looking at products that provide automation quarter to create more efficiency so that our partners are more profitable. And that's the leadership. We are thought leaders in that area, quarter. And we're building out this end to end solution and we are constantly looking at the best of breed products that we can package quarter. As a one stop shop singular solution, right now there's a lot of fragmentation in this area, we believe. And GrowGen has put together quarter solution that we think can be scaled, standardized and deliver what our partners, our growers are looking for, quarter, which is standardized scalability and sustainable automation that allowed their growers and their quarter operators to deliver return on investment and the highest yields to deliver the greatest product. And that's what GrowGen That's our mission and that's what our growth grows and our commercial division, and that's what we're focused on day in and day out. I appreciate the color on that. Thank you. Quarter. Next question comes from Aaron Grey at Alliance Global Partners. Please go ahead. Quarter. Thanks for the questions and congrats on the year guys. Great to see. So actually, I want to piggyback off that last question in terms of quarter. The commercial business and growth there. So, I would love to get an update in terms of where you guys are standing with some of the business with the multistate operators quarter and how those efforts there are continuing to grow, right? Because you guys obviously do a phenomenal job in the markets that are more mature and have a lot of licenses. But just as you're talking about quarter. Those East Coast markets may be evolving from limited license to the more broader license markets. And how are you quarter. Looking to also capitalize on the limited license markets and expanding that market share with the MSOs. And then if you kind of give us some of the pitch that you guys are giving to those MSOs in terms of Right. You should start working with GrowGeneration and who they might be working with otherwise if they're not working with you right now. Thanks. So Aaron, our commercial division quarter. This year, it did $48,000,000 versus 2017, up 189%. We're trending to $100,000,000 this year. Quarter. The exciting part is the growth in terms of the number of commercial customers, which is both MSOs, single state operators. We've gone from 271 in 2019 to 691 in 2020. Quarter. Today, as of March Q1, we're servicing almost 1300 commercial customers. Quarter. So that number constantly is growing. And the reason why we're attracting the MSOs is that we're one of the few companies quarter that has the infrastructure, the supply chain, the inventory, but it's the right inventory. It's the inventory that these large commercial companies quarter. Our seeking, its terms, its business to business, its GrowGen investing in technology like Agron quarter to make it easier for them to purchase and optimize their supply chain. So that's what GrowGen delivers and that's why you see these kind of numbers, quarter, which is across the board, more commercial customers, more revenue that we're gaining, more market share than we gain quarter. Market to market. And it's expanding because there are more licensed growers. There's more expansion. These MSOs are adding on, quarter, which is all incremental business that GrowGen is gaining. Quarter. It's a beautiful color there. Thanks for that. And the second question for me. So as you guys continue to grow in scale and also become quarter. Less reliance on those bigger manufacturers like you guys mentioned from 50%, 40%, looking for that to go Low to mid-30s, I think you said. Just how do you think about potential changes in the competitive landscape, right? So as you guys quarter. Continue to grow and become less reliant, right? Maybe they start to feel a little bit more and maybe there might be some pricing pressure as they try and get some more market share back. So just quarter. Interested in terms of how you think about that competitive landscape and how it evolves over the next 12 to 18 months as you continue to grow and become less reliant on those manufacturers? Yes, Aaron, I think the word less reliant is again, it's certainly it is not what we're looking for. Quarter. We're looking to sell best of breed products that our clients need and our customers need. So as long as our manufacturers and distributors quarter. This industry right now, as I spoke about earlier, No Controlled Environmental Act. The industry right now, the cannabis industry, there's a bunch of different parts of it. 1 is the home grow. Quarter. So the home grow again is certainly less demanding than you're seeing from the single state operators up to the large MSOs. Quarter. So there's a lot of different divisions of this industry right now. Some of it equates much more to the, again, the whole markets with That are not that use different products, some of them that large MSOs do and the large single state operators. I only could tell you back in 2014 when I started in this industry, quarter. When you walked into a growth facility, plants were on the ground, individuals were running around watering plants, feeding plants. Quarter. There was no standardization within these grows. If you walk into a grow right now, I mean, you'll be it's fascinating. Quarter. When you really see the complexity of what's going on in these growths, the 2 biggest inputs right now, for the large MSOs and single state operators quarter for Manpower and Electricity. And right now, what you're seeing is a tremendous shift right now. We're looking for more sustainable products to grow. Quarter. So for GrowGen, as long as best of breed products are on the market, we're going to continue to buy Great. Thanks and best of luck in 2021. Thanks, Aaron. Quarter. The last question comes from Glenn Mattson at Ladenburg Thalmann. Please go ahead. Hi, guys. Thanks for taking the question. Quarter. So going back to the Agron, really interesting acquisition that makes a ton of sense. I'm just curious the quarter. It's a bit different from what you've typically acquired in terms of acquiring stores or private label products. You talked about this as like a platform. Quarter. There's like a service component of it. I'm just curious if I get a sense for quarter. And you talked about I think $20,000,000 in revenue this year to GrowGen. So maybe you can give us a sense of quarter. Like how big that business actually is, I don't know when you expect it to close and maybe some of the valuation metrics around it and if there's some level of service in that revenue or if that's all product. And then as far as the platform is concerned, is there an ability to monetize that platform over time? Is that quarter. I don't know if maybe they're doing it now. Just more color about that would be great. Yes, Glenn, to start with the transaction quarter. It closed Monday of this week. We certainly see it scalable with our commercial division. Once again, as we've quarter. We're bringing best of breed products to our customers. We're a solution provider. We look at the agron. Io website quarter as a solution provider for our commercial customers. It's giving them end to end look into inventory, into purchasing, quarter to manage what they're purchasing. It's for some of the more complex individuals that have been able to manage what they're purchasing with technology quarter from our individual stores, our individual management team. Right now is expected to do $20,000,000 quarter. In additional revenue, they have different clientele than our commercial team. And we do believe that we will continue to grow this business, quarter. And it will be a tremendous add on to our commercial team and to our commercial customers. Quarter. It's helpful. Any color on the valuation and how you came to that valuation? Quarter. It comes with the same valuation of most of what we buy right now. We're buying stuff half time sales, 3 to 5 times EBITDA. Quarter. This came in along that range, even a little under it. And we thought it's going to be a wonderful addition to our group. Quarter. And I think you'll see the Agron website continue to flourish, especially with our distribution around the country. Quarter. Aggron has, in the past, distributed from our suppliers and manufacturers. They will now have the option also to distribute through our warehouses I mean, through our distribution centers. Great. Okay. Thanks for the color. Good luck this year. Quarter. Thank you. There are no further questions. I will now turn the call back over to Darren Lambert for closing comments. Call. I'd like to thank our customers, shareholders and each and every employee at GrowGen. They have worked tirelessly this year through COVID. Quarter. And again, I couldn't be any prouder of our team and what we've accomplished in 2020 and what we've accomplished in the Q1 of 2021. Quarter. When I look at the cannabis space, a year in the cannabis space right now is 10 years in most industries. The growth at GrowGen has just been phenomenal. Quarter. And the question that I'm always asked is, how can you handle this growth? And it seems to give pause to some of the investment community. Quarter. We have a team at GrowGen that works tirelessly, and I couldn't be any prouder. We've handled and integrated each and every acquisition. Quarter. Tony Sullivan, our new Chief Operating Officer, who has been with us for about a year and a half now, has done a tremendous job integrating transactions quarter. And bringing this staff up to speed on the philosophies of GrowGeneration. I want to also thank Monty Lamoretto. Quarter. Monty started with us. We were at a $7,000,000 run rate. He leaves us 4 years later at over $400,000,000 quarter. He's just done such a tremendous job mentoring our staff and mentoring our team, and he's going to be missed as we move into the next era of GrowGen. Quarter. But when we started back in 2014, this industry was just emerging. We're in an industry right now that will be the industry of this century. Quarter. We see such tremendous growth for so many years. We see tremendous research going into the plan. And we do believe quarter that with loosening of legislation, you will see much more consumption in the future, much more plants being grown, both on the cannabis side of quarter on the fruits and vegetables side of it. I couldn't be any prouder to be at the helm of GrowGeneration. It's been a wonderful 8 years, and quarter. We think this is going to be such a tremendous decade, no less century for this company. And I want to thank our shareholders and just let you know that we work hard every day quarter. This team is up early in the morning and works late at night, and we look forward to sharing our successes in our Q1 with you in the middle of May. Quarter. Thank you so much. Stay safe and get your COVID shots. Quarter. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.