GrowGeneration(US:GRWG)2020-11-12 18:07Financial Data and Key Metrics Changes - GrowGeneration reported record revenues for the 11th consecutive quarter, with total sales up 153% to approximately $55 million compared to $21.8 million in the same period last year [18] - Adjusted EBITDA increased by 230% to $6.6 million for the third quarter, compared to $2 million last year [18][45] - Net income from store operations grew 156% to approximately $9.6 million for the third quarter, compared to $3.8 million for the same period last year [19] - The company increased its fiscal year 2020 revenue guidance to $185 million to $190 million and adjusted EBITDA guidance to $19 million to $20 million [15][53] Business Line Data and Key Metrics Changes - Commercial sales increased by 188% and e-commerce sales rose by 112% compared to the same quarter last year [10] - Same store sales grew 73% in the third quarter compared to the same period last year [19] - The online business generated $1 million per month, reflecting a 112% increase for the third quarter versus last year [20] Market Data and Key Metrics Changes - Colorado sales were up 37% quarter-over-quarter, California up 58%, Michigan up 272%, and Oklahoma up 288% [21] - The company anticipates opening a location in New Jersey in spring 2021 following the state's approval of adult-use cannabis [8][24] Company Strategy and Development Direction - GrowGeneration aims to expand its geographic reach across the U.S. through organic growth and acquisitions, targeting over 50 locations in 15 states by 2021 [50][47] - The company is focusing on margin expansion strategies, including the deployment of private label products, which are expected to contribute 10% of total sales in 2021 [22][52] - The acquisition of The GrowBiz, the third largest hydroponic chain, is expected to add $50 million in revenue and enhance the company's commercial division [16][115] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, citing strong performance in existing markets and the potential for new market entries [50] - The company is monitoring the COVID-19 situation closely, ensuring all locations remain operational and safe for employees and customers [13][28] - Management noted that the industry is still in an early growth stage, making forecasting challenging but optimistic about future performance [63] Other Important Information - The company has approximately $50 million in cash on its balance sheet, allowing for continued growth initiatives and acquisitions [52][47] - Store operating costs as a percentage of revenue decreased to 9% from 12.6% compared to the third quarter of 2019 [23] Q&A Session Summary Question: Can you provide more color on the 2021 revenue guidance and potential acquisitions? - Management indicated that the guidance is conservative due to the pandemic and that new markets may take time to develop [58][60] Question: How do you view M&A versus greenfield openings? - The company typically acquires in mature markets and opens new stores in emerging markets, with unit economics favoring acquisitions [70][72] Question: Is the GrowBiz acquisition included in the guidance? - Yes, the GrowBiz acquisition is built into the guidance for 2021 [113] Question: What is the expected tax rate going forward? - The tax rate is influenced by federal and state rates, with some non-deductible expenses affecting the current quarter's rate [120] Question: Can you elaborate on private label initiatives and their impact on margins? - The company targets 10% of revenue from private label products, which are expected to have margins upwards of 50% [126]