GRWG

Strategic Transformation & Core Priorities

• The company's multi-year transformation strategy is focused on three core priorities: expanding the commercial B2B platform, growing proprietary branded products, and maintaining a disciplined cost structure.
• Three consecutive quarters of year-over-year revenue growth have been achieved, even with a smaller retail store footprint, marking significant progress in the shift to a commercial, proprietary brand-driven business.

Proprietary Brand Growth

• The company hit its full-year 2026 target of 40% proprietary brand penetration of cultivation and gardening revenue halfway through the year, up from 32% in Q2 2025.
• Proprietary brands deliver higher margins, recurring consumable sales, and greater competitive differentiation; key brands include Charcor, Drift Hydro, The Harvest Company, Dialed In, and Power SI.
• Currently ~90% of proprietary brand sales are through Grow Generation's own commercial division, with significant untapped growth opportunity in broader industry distribution and expansion into lawn and garden/agriculture markets.

Financial & Operational Efficiency

• Q2 2026 gross margin reached 28.5%, a 310 basis point sequential improvement and a 20 basis point year-over-year improvement, driven by higher proprietary brand penetration partially offset by higher transportation costs.
• Store and other operating expenses declined 21.9% year-over-year to $6.1 million, and total operating expenses decreased 13.1% to $14.7 million, reflecting sustained benefits from multi-year cost reduction initiatives.
• SG&A increased 5% year-over-year to $6.5 million, due to intentional reallocation of cost savings to expand the commercial sales force, marketing, and proprietary brand product trials to support growth.
• Q2 2026 adjusted EBITDA was positive $0.3 million, a $1.6 million year-over-year improvement, marking the first positive adjusted EBITDA after years of losses.

Balance Sheet & Capital Allocation

• Ended Q2 2026 with $41 million in cash, cash equivalents, and marketable securities, and no debt, giving the company a strong competitive position and significant financial flexibility.
• Repurchased 700,000 common shares at an average price of $1.38 per share in Q2 2026 under a $10 million authorized repurchase program; approximately $9 million remains available for opportunistic repurchases for the rest of 2026.

• Full year 2026 net revenue guidance is maintained at $162 million to $168 million, which represents expected full-year growth compared to 2025.
• Full year 2026 adjusted EBITDA guidance is upgraded to a range of $2 million to $3 million, up from the prior expectation of approximately breakeven. The upgrade reflects strong year-to-date execution, higher-than-expected proprietary brand penetration, disciplined cost management, and expected recognition of over $2 million in IEPA tariff refunds in Q3 2026.
• Q3 2026 net revenue is guided to a range of $44 million to $46 million, with positive adjusted EBITDA expected for the quarter. Q3 2026 is still expected to be the company's strongest revenue quarter of 2026, despite a year-over-year decline driven by unusually high durable sales volume in Q3 2025 that created a tough comparison.
• Q4 2026 is expected to follow normal historical seasonality, and management anticipates a stronger Q4 2026 performance compared to Q4 2025.
• SG&A is expected to remain in the low $6 million range for the second half of 2026, relatively stable with a slight incremental decline from Q2 levels.

Grow Generation operates two core product segments, with total Q2 2026 net revenue of $43.2 million, representing 5.5% year-over-year growth and 12.6% sequential growth. 1. Cultivation and Gardening: Generated $34.9 million in net revenue for Q2 2026, up from $32.9 million in Q2 2025. Proprietary brand sales made up 39.7% of this segment's revenue, up from 32% in the year-ago quarter. Gross profit for the segment increased year-over-year, driven by higher sales volume and the higher-margin proprietary brand mix. 2. Storage Solutions: Generated $8.3 million in net revenue for Q2 2026, up from $8.1 million in Q2 2025. Gross profit dollars for the segment declined modestly year-over-year due to project mix and rising transportation costs, despite the higher sales volume. This segment contributes 19.2% of total company net revenue, providing diversified revenue outside traditional cultivation markets.

No specific new material risks or operational failures were explicitly discussed during the call. The standard safe harbor disclosure notes that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, and investors are referred to the company's SEC filings for detailed risk discussion.

Q: The adjusted EBITDA guidance was raised while revenue guidance was held. How much of the EBITDA increase comes from stronger core Q3 performance versus the IEPA tariff refund, and how does expected Q4 seasonality impact the outlook? / A: Strong year-to-date core performance, including returning to positive adjusted EBITDA in Q2 and achieving targeted cost reductions, gave management increased confidence in the underlying operating model. A more than $2 million IEPA tariff refund expected to be recognized in Q3 is also a primary driver of the guidance upgrade. Management expects Q4 to follow normal historical seasonality as previously communicated. (212 characters)

Q: Proprietary brand penetration hit the full-year target in Q2, halfway through the year. What channels are driving faster-than-expected growth, and how should we think about future channel expansion? / A: The fastest growth is coming from commercial multi-state operator (MSO) customers, which currently account for ~90% of the company's proprietary brand sales. Management sees significant untapped growth opportunity from broader distribution of proprietary brands across the industry, and long-term expansion into the lawn and garden and general agriculture spaces. Growth is currently off a small base, so it will take time to move the needle on overall results. (325 characters)

Q: Q3 2026 guidance implies a year-over-year revenue decline after three consecutive quarters of growth. Is this a change in trend, or why is guidance conservative? / A: Q3 2025 had unusually high volume of durable goods sales that created lumpy year-over-year comparisons; that quarter was an outlier for 2025. In 2026, revenue is more evenly balanced across quarters, and Q3 2026 is still expected to be the company's strongest revenue quarter of the year. Q3 2026 will also have a higher mix of higher-margin consumable proprietary products, so margins will be higher than Q3 2025, and Q4 2026 is expected to be stronger than Q4 2025. (342 characters)

Q: With a strong debt-free balance sheet and an active share repurchase program, how does management prioritize capital allocation between M&A, reinvestment, and returning capital to shareholders? / A: Management is actively evaluating attractive M&A opportunities in the industry and adjacent spaces like agriculture and lawn and garden, but will only pursue transactions that can be successfully integrated and deliver accretive earnings. No appropriate deals have been found to date, so the company is comfortable holding cash and has increased activity in modest, conservative capital expenditure lending for customer deals. The company will continue opportunistic share repurchases under the existing $10 million authorization. (361 characters)