GrowGeneration Corp. Q4 FY2024 earnings call

• 2024 was a transformational year with successful strategic transformation to a product-driven, B2B-focused company. - Proprietary brand sales grew, with 30.4% of Q4 2024 Cultivation and Gardening revenue from proprietary products vs 21.2% in Q4 2023. - Launched new B2B e-commerce platform in Q4 2024 with positive customer feedback. - Streamlined operations, completed store consolidations, reducing expenses, now with 31 operational stores and 2 regional distribution centers. - Aimed to have proprietary brands reach 35% of Cultivation and Gardening net sales by end of 2025. - Made progress in margin improvement, targeting 30% gross margin by end of 2025.

For Cultivation and Gardening, full year 2024 net revenue was $188.9 million. Total 2024 proprietary brand sales were $39.5 million, representing 24.2% of total net sales. In the fourth quarter of 2024, 30.4% of Cultivation and Gardening revenue was from proprietary products compared to 21.2% in Q4 2023. For the Storage Solutions segment (MMI), full year 2024 revenue was $25.4 million with $6.3 million in operating profit. In the fourth quarter of 2024, net sales of commercial fixtures within MMI decreased 41% to $4.5 million from $7.7 million in the comparable prior year quarter.

• Full year 2025 net revenue expected in the range of $170 million to $180 million. - Full year 2025 adjusted EBITDA expected in the range of a $2 million loss to a positive $2 million profit. - Full year 2025 gross margin anticipated to be in the range of 29% to 31%. - Aim to reach profitability in the second quarter of 2025.

• Proposed global tariffs could impact costs; measures in place like diversifying sourcing, renegotiating with vendors, and implementing surcharges. - Regulatory uncertainties around cannabis reclassification, banking policies, and SAFE Act, which could affect the industry and the company's growth.

Q: On gross margin cadence, when can we expect improvement?

A: Greg Sanders stated there will be an immediate lift in Q1 on gross margin, with continued improvements throughout the year, targeting 30% full year gross margin.

Q: On shifting to e-commerce from stores, are you comfortable with 31 stores?

A: Darren Lampert said restructuring is largely complete for stores, down to 31 focusing on high-performing markets, and B2B portals are working well with transfer of commercial customers to portals.

Q: On proprietary brand sales channels, how are they distributed?

A: Greg Sanders said wholesale business is almost entirely proprietary brands, e-com is picking up with focus on Amazon and FBA, and retail/commercial groups are accelerating proprietary brand penetration.

Q: On demand and regulatory environment, any updates?

A: Darren Lampert said they're waiting on cannabis reclassification and safe banking, optimistic Trump administration will reschedule, and current 2025 numbers are based on no federal changes this year but optimistic on future regulatory changes boosting the industry