Good afternoon, ladies and gentlemen. My name is Leonie and I’ll your conference operator today. At this time I would like to welcome everyone to GrowGeneration Corp First Quarter 2019 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. [Operator Instructions] Thank you. I would like to turn the conference over to your host Mr. Michael Salaman, President. Please go ahead.

Thank you. Good afternoon. My name is Michael Salaman, Co-Founder and President of GrowGeneration Corp. At this time, I would like to welcome everyone to the GrowGeneration first quarter 2019 earnings call. With me is Darren Lampert, our CEO; and Monty Lamirato, our CFO, who will both be participants on our call this afternoon. After our CEO and CFO’s remarks, there will be a question-and-answer session. One bit of housekeeping related to our IR activities, our shareholder meeting is scheduled for 3:00 p.m. May 16th at the law offices of Robinson & Cole in New York City. With that, let's move forward on today's call. As always, we expect to make forward-looking statements this afternoon, but I want to caution you that our actual results could differ materially from what we say here. Investors should familiarize themselves of full range of risk factors that could impact our results and those that are filed in our Form 10-K, which we filed with the Securities and Exchange Commission. I’d also remind everyone that today's call is being recorded and an archived version of the call will be available on our website later today. Let’s get things started. For those of you who are newly being introduced to GrowGeneration, we're a publicly held company, trading on the OTCQX exchange. We are the largest and fastest growing chain of hydroponic garden centers selling directly to all types of cultivators and growers throughout North America. Our growth has been driven through same store sales. And from an acquisition strategy, we aggressively opening up new locations. Since our inception, the company has delivered year-over-year growth of over 100% selling thousands of specialty products and servicing tens of thousands of growers of all types. With hyper growth comes infrastructure, which we’ve built across sales, purchasing, logistics, technology and accounting, the company now has the foundation to surpass $100 million of revenue profitably next year. Today, we have five wholly-owned subsidiaries that reflect the corporate initiatives and strategies of the company for 2019 through 2020. First subsidiary is GrowGeneration Canada Corp, which is a corporation that we formed to expand our operations into Canada, which we plan to do in 2019. Second GrowGeneration Management Corp, is securing a large capital projects and buildouts consisting of a team of 10 commercial experts. Three, GrowGeneration Hemp Corp is dedicated – is a dedicated division solely for developing a supply chain of agricultural products solely for hemp farms. Fourth, GrowGen Distribution Corp is developing and has developed proprietary products across all product categories to drive higher margins and generate sales into various vertical markets. And lastly, advancing our ecommerce strategy through our recent acquisition of HeavyGardens.com. We're now adding ecommerce functionality to all of our locations, which we plan to have completed by the end of this year. With that said, I will now turn the call over to Darren, who will present the financial results of our first quarter. Darren?

Thank you, Michael. Good afternoon and welcome to our first quarter 2019 earnings call. We'd like to begin our call by thanking our shareholders, management and employees for the continued support and belief in the mission, Michael and I set forth five years ago to build the largest national chain of hydroponic stores in the United States with 21 locations in eight states a rapidly expanding online superstore HeavyGardens.com. Today, GrowGeneration is the leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting, ventilation systems and accessories for hydroponic gardening. The company's first quarter financial results were transformational. We improved the financial performance of the company in all areas. I'm going to read this one more time because it's been five years and this is such an important milestone for GrowGeneration and staff. The company's first quarter financial results were transformational. We improved the financial performance as a company in all areas. Revenue was up almost 200% year-over-year and almost 50% from fourth quarter 2018 over first quarter 2019. Adjusted EBITDA was over $600,000 at a positive $0.02 per share. Our same store sales were up approximately 42% year-over-year with margins increasing over 1 basis point. Year-over-year the company increased revenue by $2 million in California and Colorado, $1.5 million in Michigan in Oklahoma, and $500,000 in both Rhode Island and Nevada. The newly acquired stores and our new store openings are all performing much better than expected. Our newly acquired ecommerce store, HeavyGardens, added had almost $700,000 in new revenue. Our commercial division headed over $2.5 billion in revenue from some of the largest multistate operators in the country. GrowGeneration now services Harvest, TILT, iAnthus and Cresco Labs to name a few of our multistate operators. Our strategies to increase margins are working by purchasing in…

Thanks Darren. Some of these items, Darren went over, but I'll give it a little bit more detail. So net revenue for the three months ended March 31, 2019 increased approximately $8.7 million, or 199%, to approximately $13.1 million, compared to approximately $4.4 million for the three months ended March 31, 2018. The increase in revenues in 2019 was primarily due to the addition of 14 new stores opened or acquired after January 1, 2018, and the new e-commerce site acquired in mid-September 2018. The 14 new stores and the new e-commerce web site contributed $9.9 million in revenue for the quarter ended March 31, 2019. Four new stores which we opened at various times during the quarter ended March 31, 2018 contributed sales of $1.7 million during that quarter. Same store sales were up 42% for Q1 2019 compared to Q1 2018. Cost of goods sold for the three months ended March 31, 2019 increased approximately $6.2 million, or 195%, to approximately $9.4 million, as compared to approximately $3.2 million for the three months ended March 31, 2018. The increase in cost of goods sold was primarily due to the 199% increase in sales comparing the three months ended March 31, 2019 to the three months ended March 31, 2018. Gross profit was approximately $3.7 million for the three months ended March 31, 2019, compared to approximately $1.2 million for the three months ended March 31, 2018, an increase of approximately $2.5 million or 210%. Gross profit as a percentage of sales was 28.2% for the three months ended March 31, 2019, compared to 27.1% for the three months ended March 31, 2018. Store operating costs as a percentage of sales were 15% for the three months ended March 31, 2019, compared to 20.4% for the three months ended…

Thank you, Monty. GrowGeneration has built a supply chain with 21 locations in eight states. Today GrowGeneration is the leading marketer and distributor of nutrients, growing media, advanced indoor and greenhouse lighting and ventilation systems, and accessories for hydroponic gardening. Our company improved his financial performance significantly in the first quarter, 2019 versus first quarter 2018, revenues were up 200%, margins up one point, adjusted EBITDA was a positive $0.02 per share with operating expenses down 26% and corporate overhead down 107% as a percentage of revenue. Second quarter is trending up as it is our traditionally strongest quarter of the year. We serviced thousands of growers and several of the countries, largest multi-state operators. The Company continues the process of uplistening to a larger exchange. We project strong growth and margin expansion in 2019. We're adjusting our guidance off for 2019 to $60 million to $65 million in revenue and $0.14 to $0.18 a share in adjusted EBITDA. We look forward to sharing our continued successes with our shareholders, our management team and partners. We will now open the call up for questions Operator.

Thank you. [Operator Instructions] Your first question is from Alan Brochstein from 420 Investor. Alan, please go ahead.

Hey guys congratulations, very exciting to see the financials you shared this quarter.

Thank you.

Thank you.

I just had, first of all, I appreciate you guys sharing some of your clients. I think that's the first time I've heard that. And I heard TILT Holdings, Cresco and iAnthus, I think you mentioned another one if you could just…

Harvest.

Harvest. Got it. Thank you. So one of the things I noticed was inventory build. You guys used some cash and I understand that you believe you have enough cash to handle your current operations for the rest of the year. But clearly you guys has been in the M&A mode, are you finding some other potential ways to raise cash besides selling equity? I've seen some of your peers’ capital into the debt markets for instance. Are there any other forms of financing open to you guys at this point?

Yes. We're currently exploring all types of financial instruments to finance acquisitions. Currently we have enough capital – cash on our balance sheet to fund acquisitions that we'll be doing over the next month or two. But once again, we're always looking for additional types of funding for accretive acquisitions.

Okay. And then my next question is, fantastic job in some of these new markets like Oklahoma and Michigan, where you guys went from zero to something substantive pretty much immediately. I'm just wondering if you could talk about these markets in terms of whether or not you're seeing other competitors emerge or how big the runway to be in some of these new markets that you guys have entered?

The strategy of the company, Alan has been to be a first mover and we went into Oklahoma as the laws were passed. And they were very favorable laws pertaining to the number of licenses that they've issued, which provides GrowGeneration with a nice targeted list of growers and cultivators. And because of that, we've captured the market. And with our brand, and our staff and our ability to service these commercial growers, we have customers coming to us. We do very little marketing in these markets. So it's mainly word of mouth and providing a complete one-stop shopping solution for those licensed commercial growers. And we see that in the other markets as well. Michigan we've entered into and it's another market that we see a lot of potential for 2019 growth. And we're constantly identifying these emerging markets as the laws pass, GrowGeneration will be an early mover to put our operation in those markets to provide a one-stop solution for these large commercial operators and the strategy is working.

Yes. And I think – this is Darren. I think a good way to look at GrowGeneration. We will be a first mover in all new markets and certainly a consolidator in more mature markets. And what you're seeing right now in our first quarter numbers is the resurgence of the Colorado and California markets. And you're also seeing new markets opening up to GrowGeneration where we are a first mover. So you're really seeing the perfect storm, you're seeing consolidation in a lot of the mature markets that we're leading right now. So you're certainly seeing, a lot of the smaller companies that can handle the large MSOs and the large cultivators closing their doors. And you're seeing the larger, more wealth funded companies starting to take over in some of these more mature markets. And you're also seeing within a 45 day lead period, we have a team over at GrowGen that can open a store anywhere in the country. And do it right and get its operate and through our experiences in our eight states right now, we're getting much more efficient in opening stores in new states.

Great. And then I saw you guys in Miami in January, you were very excited about the hemp opportunity and I’m sure that’s playing out. Can you share a little bit with us about your progress in that vertical?

Did you say hemp?

Hemp.

Hemp, we formed our division and we're defining, I mean, there's complimentary products that we already stock that would work for the hemp market. We're also learning, there's large agricultural machinery and other products that we're investigating to put into a portfolio. And the goal is to create a supply chain like we've done on the cannabis side and do the same thing for the hemp market. Alan, we certainly believe that the farming and the cultivation and the acreage that today is about 75,000 based on our data is only going to get larger. And GrowGeneration is so well positioned to take its knowledge of the plant and also its ability to create a supply just in time channel for cultivators and farms. We just want to get the product right and we're doing the work right now. We're putting our program together and it's something that will be available on a very turnkey basis like we have on the cannabis space in the next month or so. So it's something that's a work in progress and we are extremely excited about the accretive revenue that that vertical market can bring to the company.

Great. So just to be clear, all the success you just had in Q1 didn't even include much of anything from…

Very, very little. I mean, we've started to fulfill some of the Kentucky based farms and the farms in North Carolina but – and some in the Colorado market, but very, very small as a percentage of our overall business.

Okay. I’ll jump back in the queue. Thank you for taking my questions.

Thank you, Alan.

Thank you, Alan.

Thank you. Your next question is from Aaron Grey from Alliance Global Partners. Aaron, please go ahead.

Thanks for the question and congrats on the quarter guys.

Thanks Aaron.

Thank you.

So quickly just on the top line raised guidance, can we talk about which states kind of came in ahead of expectations? I know Oklahoma did very well. So I guess what drove that outperformance for you guys to raise that top line and was it both part of 1Q and then also what you're expecting going forward or is the embedded kind of raise the guidance more just the outside that you saw in 1Q?

Well, it was a little of both. Aaron, we're seeing strong performance in all our stores. It's not only just one state. We're seeing the resurgence of some of our old more mature states that we're in, California and Colorado and also Rhode Island. But we're also – we purchased three stores in Michigan a year ago that we're seeing tremendous growth in. We bought a three store operation that was doing about $3.5 million. Those stores are on a $6.5 million to $7 million run rate right now. And we're seeing tremendous, tremendous growth in our Oklahoma markets and new stores that we've opened. So I mean, we're seeing growth everywhere, we're seeing our old stores starting to work, we're seeing our new stores starting to work. We're also seeing our online store is starting to gain some traction. So it was basically the first quarter was strong, straight around. We sort of know weaknesses, within the quarter at all. And we're going into our seasonally strongest second quarter right now. Our first month sales are tracking wonderfully. And we're into May right now. So everything seems to be firing on all cylinders right now. The one other thing that I would add, Aaron, is that our commercial division, which is a fairly new division that the company formed this year, is really starting to get its legs on there itself. We now have 10 individuals that all they do is work to obtain, commercial accounts on the large multistate operators, they're dedicated, managers for those accounts. And that side of the business is growing. And we see that side of the business, certainly continuing to grow and support the operation at the store level. Our e-commerce business is growing. That's another part of the business that we didn't have last year. And that's – that's a nice to have, and it's certainly part of the long-term strategy of enabling our customers to not only come into one of the locations which they love to do by the way. They love to talk to one of our professional growers, but they also would like the convenience of accessing their orders online and being able to pick it up or have it delivered. So that technology is being evolved from our acquisition that we made, that's going to be embedded as part of our, optionality for our customers. So I think it's really, as Darren said, it's a combination of everything. Consolidation, expansion, growth, and GrowGeneration has scaled it's business where it can now attract these large multistate operators, which are very challenging to manage on a national level and a regional level. And they're coming to us because we're performing and we're executing, and we see that continuing.

All right, great. And I just wanted to dig a little bit deeper on kind of that – those MSO relationships, we've made a lot of progress. Just what stage would you see you are in that effort to kind of penetrate those large players and, has that been evolving kind of faster than you think? I think you could just kind of touched on it before, but then also within working with those players that you talked about earlier, I guess, what level are you working with them? Do you kind of first start within one state and then hope to kind of, expand and be a provider for them in multiple states? Or I guess, can you just talk about kind of how that kind of evolves in terms of the relationships you have with the current MSOs you're working with? And also the knowledge you have to – come on board?

Yes. It’s works exactly the way you described it. It starts in a region and then we start to – get our experience, working with the MSOs, in a market. And then we expand into a second and tertiary markets. All the companies that we mentioned, we're in multiple locations. So within those MSOs there's continue growth, organic growth, because all these MSOs, are in multiple locations. Most of them are in eight, nine, 10 different locations. Right now the company, with the MSO business is in a handful within those individual organizations. So as we continue to serve as the individual grows within their portfolio, we're expanding organically through an MSO strategy, because they have multiple cultivation facilities. And it's working. It's certainly working for the company.

All right, great. That's all I have on. That's all I have on mine. Best luck.

Thank you.

Thank you, Aaron.

Thank you.

[Operator Instructions] Your next question is from Roger Duan from R.F. Lafferty and Company. Roger, please go ahead.

Hi, Darren. Hi Michael, congrats on the quarter.

Thank you, Roger.

Thank you, Roger.

Hey, so just quick – couple of quick questions. First of all, can you talk a little bit about your private label business, and how's it progressing? A sort of – it is what contributed to your margin expansion for this quarter and where do think this is going to particular second is going – are going forward?

Roger, the private – the private label business, which was based on the acquisition that we made of about 18 different trademarks, and we've picked up some inventory. It's just now starting to benefit the company from a margin perspective. It just recently within the last, 30 days we've moved product into the stores. And that in combination with our buying power, our ability to buy more direct, and get better deals, is what's driving our margin strategy and our margin increase. In addition, the company is working to develop intellectual property around different types of products that will be private labeled and owned. And that's something that's been a work in process that has yet to come into the market, but we are developing different products that will have IP attached to it.

Right. So are those are private label products, in all the states right now? Or is it still in the, like sort of a regional test run?

It’s still being developed, they're not in the market as of today.

Okay. Okay. No problem. So second, as you talked about your multistate – your relationship with multistate operators, as you know, they usually have bigger purchasing powers will it be a problem for you guys in terms of – they sort of pressure down the price for products they were buying and how will – how will it impact your margin, as – there a percentage of – as their purchase become bigger as a percentage of your revenue, if that makes sense?

Roger, again, our margins are going up not down right now. So, we're seeing no pressure from the MSOs on a margin standpoint. We look at GrowGen again, we have 21 stores and an online store. So as you're seeing as a blend of margins, which starts at the bottom with the MSOs and go straight to the individual customers that are growing, lettuce and tomatoes. So, right now our margins have never been stronger. I think, our first quarter was – was our strongest margin quarter and we're seeing a continuing into the second quarter.

Okay, great. I think that's it for me.

Thank you, Roger.

Thank you. There are no further questions at this time. Please proceed.

Well. We want to thank everyone for taking the time today, and we appreciate our shareholders, our management team, and we're excited to talk about our second quarter shortly. Everyone have a great afternoon and thank you.

Thank you.

Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.