GrowGeneration Corp. (GRWG) Q4 2020 Earnings Report, Transcript and Summary

Good morning. My name is Joana and I will be your conference operator today. At this time, I would like to welcome everyone to the GrowGeneration Corp. Fourth 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. [Operator Instructions] Thank you. Mr. Michael Salaman, you may begin your conference.

Thank you. Good morning. My name is Michael Salaman, Co-Founder and President of GrowGeneration. At this time, I would like to welcome everyone to the GrowGeneration fourth quarter and full year 2020 earnings conference call. With me this morning is Darren Lampert, our CEO and Co-Founder; Monty Lamirato, our CFO; and Tony Sullivan, our Chief Operating Officer, who will all be participants on our call this morning. After our management remarks, there will be an analyst Q&A session. As always, we expect to make forward-looking statements this morning, but I want to caution that our actual results could differ materially from what we say here. Such statement can be identified by terms such as believe, expect, intent, and may. You should not place undue reliance on forward-looking statements as actual results may differ materially from these forward-looking statements. We do not undertake any obligation to update any forward-looking statements we make today. For more information about factor that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issues yesterday as well risks and uncertainties included in the section under the caption Risk Factors and Management Discussion and Analyst -- financial condition and results of operations in our Annual Report on Form 10-K 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. I also remind everyone that today's call is being recorded and an archive is -- available on our website later today. The hydroponic industry that we serve has gone through monumental changes in 2020 and 2021. Legislation is opening more states to grow more plants on the national level. All eyes are focused 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. These actions will help contribute to statewide economies providing jobs and revenues going forward. 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, delivering end-to-end solutions for large commercial operators. We lead by having fully stocked hydroponics garden centers, investments in technology; supply chain, omni-channel solutions, and the employment of the largest contingent of grow pro professionals. GrowGen's multi-sales channel platform, focus on the acquisitions of the best of breed hydroponic operations and delivering end-to-end solutions for our commercial customers is working as we continue to grow our business with a relentless focus on execution and financial discipline. I will now turn the call over to Darren, who will present our full year 2020 results. Darren?

Thank you, Michael. Good morning and welcome to our full year 2020 earnings call. Before I begin with my prepared remarks, I'd like to thank each and every one of our staff and customers for their hard work, dedication, and loyalty. I also would like to take this time to thank Monty Lamirato for his service, hard work, and dedication as our CFO who is retiring at the end of Q1 2021. The company has announced Jeffrey Lasher as Monty's successor, who brings many years of public company CFO experience that both West marine and Crocs. GrowGen has had a transformational year in 2020. As we continue to outpace our guidance, we were increasing fiscal year 2021 revenue guidance to $415 million to $430 million and increasing adjusted EBITDA guidance for 2021 to $48 million to $51 million. The company is providing first quarter 2021 revenue and adjusted EBITDA guidance of $86 million to $88 million and $9 million to $9.5 million respectively. The company is also increasing its guidance to reach over 60 garden one [technical difficulty] and over 100 garden centers by 2023. The company generated revenues of almost $200 million in 2020, 143% increase year-over-year with a 63% increase in same-store sales. Adjusted EBITDA was $19.2 million for full year 2020 versus $5.3 million for full year 2019, an increase of 264% 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 stores for 2020 to our 52 hydroponic garden centers across 12 states. Today, we have over 100,000 walk-in customers per month to our hydroponic garden centers. Our e-commerce channel grew over 123% and our commercial division now over $49 million in sales, grew at 188%. Our private label initiative is now over -- now well over $10 million in purchasing in the first quarter 2021. We plan to derive a projected 10% of revenue from our [technical difficulty] We acquired two of our industry's top selling product brands -- and Char Coir. Both of both of these proprietary brands are expected to contribute well over $10 million each in revenue in 2021. In addition, on March 19th, 2021, the company purchased the business-to-business ERP platform, Agron.io, a leading agricultural portal that allows commercial growers to manage their purchasing and logistics in one platform. Our best-in-class staff is now close to 600, with over 500 of our teammates experienced grow pros. We have created the largest sales team of hydroponic product specialists in the country. Our steadfast focus on rapid strategic growth in key markets, both organically and through acquisitions, has resulted in our record revenues and EBITDA. With 800,000 square feet of retail and warehouse space, GrowGen is building the largest super high -- super hydroponic garden centers in the U.S. that service commercial, retail, and craft growers. Income from store operations was $32.3 million for full years 2020 versus $11.9 million for the same period last year, an increase of 171% year-over-year. Income from store operations as a percentage of revenue was 16.7% for the full year 2020 compared to 14.9% for the same period last year. Our commercial revenues for the full year were $49 million, 188% increase year-over-year and our e-commerce revenue finished 2020 at $10.6 million, an increase of 123%. Our online division transactions were up almost three times to over 17,000 transactions compared to 6,300 in 2019 and attracted over 1.2 million unique visitors to growgeneration.com. We continue to focus on margin expansion strategies that include furthering the deployment of more private label products, acquisitions, or proprietary product, and driving more efficiency at the purchasing level as we continue to scale and grow topline revenue. Store operating costs as a percentage of sales was 9.7% for full year 2020 compared to 12.7% for the same period last year, an improvement of 24% year-over-year. Corporate payroll and general and administrative expenses, excluding non-cash operating expenses, as a percentage of revenue is 7% for 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. GrowGen has a tremendous team of essential employees who have made a commitment to our company and customers and I cannot be any prouder. I'm inspired by their efforts and dedication that they have worked tirelessly to service our customers and communities. I will now turn the call over to Tony Sullivan, our Chief Operating Officer, who will brief everyone on our key operating initiatives executing the full year 2020 and then to our CFO, Monty Lamirato, 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. As stated by Darren, we currently operate 52 of our locations across 12 states. Our staff is now around 600 across our multiple divisions, hydroponic garden centers, e-commerce, and commercial. Let's take a look at some key operating initiatives. We'll start with acquisitions and integrations. 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 two leading product companies Canopy Crop Management in December of 2020, and [technical difficulty] March 12th of 2021. 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 method methodology -- sorry, methodological approach that includes inventory valuation and analysis, onboarding personnel, and point of service, POS, computer training. Our proven process allows us to close multiple transactions in any given month and book revenue on the day of closing. At the same time, we help those companies leverage and scale to increase sales and efficiencies over time and become a part of our GrowGen model. We have developed a real estate and two-year growth strategy that is delivering multi-channel supply chain for direct fulfillment; product transfers to any grow generation 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. Today, we operated 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. On March 9th, 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. We are in the process of building several additions -- additional locations that will serve as fulfillment centers that include 25,000 square feet in Phoenix, Arizona; 58,000 square feet Medley, Florida; and we expect these locations to be opened by summer of 2021. Omni-channel and new website; at growgeneration.com, we are currently testing buy online pick up in store; pick, pack, and ship; and curbside pickup solutions as we wrap up the final development and launch of our new site. In 2020, growgeneration.com had 17,000 transactions versus 6,300 in 2019 and attracted over 1.2 million unique visitors. In addition, as stated earlier, we just completed the acquisition of Agron.io, a dedicated B2B site to better serve our rapidly growing commercial base. Let's take a look at private label. Our newest product offerings are exceeding expectations and our expansion is well underway, with customers purchasing over $10 million in private label purchases in the first quarter of 2021, we have developed private label products that now include ion lighting, Sunleaves powder nutrients, an additive line; Optilume bulbs, blueprint controllers and timers, grow access pots and containers, harvest edge pruners, trellis, and other garden accessories. Our proprietary brands now include 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, SKU rationalization and store planning remain -- and our constant source of focus and improvement. We have selected one of the industry's top partners in the space and we anticipate significant learnings and data to improve our inventory turn, optimization, profitability, and in-store consistency. We have 16 product departments and we have redone all of our major categories, subcategories 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 one stop shopping destination for all types of growers. And at this time, I'm going to turn it over to Monty Lamirato to give our financial highlights.

[technical difficulty] As Darren previously announced, net revenue for the full year 2020 was approximately $193 million compared to approximately $80 million, an increase of 143%. The increase in revenues is due to one; the addition of 14 new retail stores opened or acquired during 2020 for which revenues were $31 million. Two, 11 stores opened or acquired at various times during 2019 that were open for all of 2020 which had an increase in revenues of $51 million. Three, same-store sales increased 63% comparing 2020 to 2019 -- excuse me, which had an increase in revenues of $28 million. And four, an increase in our e-commerce sales of $5.9 million from 2019 to 2020 and revenues from our Canopy Crop recent purchase in December of 2019 of $300,000. Gross profit was $51 million for the year ended December 31st, 2020 as compared to $22 million for the year ended December 31, 2019, an increase of $29 million or 132%. Gross profit as a percentage of sales was 26.4% for the year ended December 31st, 2020 compared to 27.6% for the year ended December 31st, 2019. The slight decrease in gross profit margin percentage in 2020 was due to a greater percentage of commercial and e-commerce revenues as a percentage of total revenue, both of which have lower margins than in retail sales. Commercial and e-commerce represented 31% of all revenues for the year ended December 31st, 2020 compared to 28% of all revenues for the year ended December 31st, 2019. Operating expenses are comprised of store operations, primarily payroll and utilities and corporate overhead. Store operating costs were approximately $18.7 million for the year ended December 31st, 2020 and approximately $10.1 million for the year ended December 31st, 2019, an increase of approximately $8.6 million or 85%. The increase in store operating costs was directly attributable to one, the addition of 14 new retail stores opened or acquired in 2020; two 11 stores opened or acquired at various times during 2019 that were open for all of 2020. The addition of the stores as discussed above in the revenue section was the primary reason for the revenue -- for the increase in store operating costs. Store operating [technical difficulty] revenues were 9.7% for the year ended December 31st, 2020 compared to 12.7% for the year ended December 31st, 2019, a 24% reduction. Corporate overhead comprised of general administrative costs, share-based compensation, depreciation and amortization, and corporate salaries was approximately $23.9 million for the year ended December 31, 2020 compared to approximately $10.3 million for the year ended December 31st, 2019. Corporate overhead was 12.4% of revenues for the year ended December 31st, 2020 and 13% for the year ended December 31st, 2019. Corporate overhead excluding non-cash share-based compensation, depreciation and amortization was 7% of revenues, compared for 2020 compared to 8.5% of revenues for 2019. Net income for the year ended December 31st, 2020, was approximately $5.3 million, compared to net income of approximately $1.3 million for the year ended December 31st, 2019, an increase of approximately $4 million. Net income for 2020 compared to 2019 was primarily impacted by a 142% increase in revenues, offset slightly by an increase in cost of goods sold. Store operating costs as a percentage of revenues was 9.7% in 2020 compared to 12.7% in 2019, offsetting the increase in cost of goods sold. Store income as a percentage of revenue increased from 14.9% in 2019 to 16.7% of revenues in 2020. Income from store operations increased $20 million from $11.9 million in 2019 to $32.3 million in 2020. Corporate overhead including non-cash cost increased $13.6 million from $10.3 million in 2019. In addition, net income was in 2020 was impacted by the provision for income taxes of approximately $3.3 million for which there was no provision for income taxes in 2019. The company had significant operating loss carry-forwards from prior years, which was used to offset taxable income in 2019, thus resulting in no provision for income taxes. Adjusted EBITDA $19.2 million for 2020 or $0.44 per share basic compared to $5.3 million for 2019 or $0.16 per share basic. As of December 31st, we had working capital of approximately $223 million. The increase in working capital from December 31, 2019 to December 31, 2020 was approximately $194 million and was primarily due to the net proceeds from the sale of common stock of $207 million and exercise of warrants totaling approximately $3.8 million. On December 31, 2020, we had cash and cash equivalents of approximately $178 million. I would now like to turn the call back over to Darren for some concluding remarks before the Q&A.

Thank you, Monty. GrowGeneration recorded a record year of increased revenue 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. 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. We plan to own and operate over 60 locations during the year 2021. We plan to break the 100-store mark by 2023. Today, we own and operate 54 including our two LA locations currently under development. GrowGeneration has built a national scalable supply chain for the agricultural and cannabis industry. Our leadership position is driven through our corporate mission statement to be the largest chain of hydroponic garden centers in North America. We continue to invest in our supply chain and technology, creating more efficiencies across all departments, providing our customers with the product they want, when they want it, and when they need it. We look forward to continuing to provide guidance as need be and we're excited to share our successes with our shareholders, our management team, and partners. Now, we would like to turn the call over to analysts for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Brian Nagel at Oppenheimer. Please go ahead.

Good morning.

Thank you, Brian.

Congratulations on a great year and a quarter. Well done. And also Marty, best of luck in your retirement.

Thank you. Appreciate it. I'm looking forward to it.

Been a pleasure. So, a few questions guys. First -- you clearly in last night's release, you lifted 2021 sales guidance substantially and this was after several revisions higher -- your revisions higher lately. Just to understand better as you think about that guidance, can you help us understand kind of composition between a more optimistic view on organic growth versus -- or -- versus acquisitions?

Hey, Brian, this is Darren. We came out of last year at about a $280 million run rate out of 2020. I mean right now we're forecasting same-store sales in the high teens to 20. This year we have successfully purchased $75 million 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 -- our run rate right now anywhere from $390 million to about $400 million. So, within our [technical difficulty] the year, $415 million to $430 million includes a few more acquisitions. We still believe that we're on pace for more than a few acquisitions, certainly a couple more product acquisitions. So, as we continue to grow this business, continue to scale and continue to increase store accounts 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 on until we do close acquisitions and get these stores open and see how the integration process is going with the with the 14 stores that we've added to our portfolio this year.

That's great. Very helpful. Then the second question also with regard to guidance. So, I did the math, correct, you're -- the sales and the adjusted EBITDA guidance applies for $0.21 -- applies or suggests adjusted EBITDA margin north of 11.5%. So, we recognize you haven't given longer term guidance, but how should we think about where that margin could ultimately go? And maybe more importantly, with the key levers behind gains $11.5 million?

One thing we look at right now, Brian is our private label. Private label will drive margin expansion. We are forecasting 10% this year. Like every company you're seeing in the retail space, there's certainly congestion and supports right now. We have $5 million to $10 million of products sitting at the ports right now. We've had a wonderful adoption in the first quarter of our private label. But again products are sitting at ports [technical difficulty] products to get in. We feel 100% comfortable with our guidance, which is really equating to over $40 million of private label products this year. As we told Wall Street margins on private label products are in excess of 50% right now. So, we do believe it will be driving a few -- about 200 basis points on the margins of this year. And we do believe as GrowGen continues to scale private label, it will continue to scale margins.

Appreciate all the color. Congratulations. Best of luck here. I'll turn it over.

Thank you, Brian.

Thanks Brian.

Next question comes from Mark Smith at Lake Street Capital. Please go ahead.

Hey guys. I wanted to talk a little bit about the recent acquisition of the Agron business. Can you walk us through your expectations on gross profit margins within that business?

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 for their supply chain. We realized very early on that the commercial customer needs a different curation of product, they need to be handled 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 this year for Agron to contribute about $20 million in additional accretive revenue, but it's going to bring so much more to the company. It's a technology platform. It's an ERP platform. It's giving more transparency to our commercial customers on their purchases, tracking history of what they're buying, accounting, invoicing. So, it's a real ERP platform that has been successfully deployed for many years. We think under GrowGen's management and strategies that we've already employed [technical difficulty] the integration of this technology with our tremendous growth in our commercial division is going to be really powerful. So, we see -- we saw this as a strategic acquisition, in addition to the accretiveness of the revenue that Agron brings to the company.

Okay. And then as we look at growth, you guys have done a great job on acquisitions here and the first quarter. Can you talk about organic store openings in 2021? Maybe what you have some leased signed planned right now or how many stores maybe you expect to open this year?

Currently right now we're working on building out two distribution hubs/retail stores commercial fulfillment in LA; one is Downtown LA, which is about 55,000 square feet and the other one is up in Long Beach, which is 70,000 square feet. We look for these two operations to be -- these two warehouse operations to be operational summertime. We're also building out right now Miami, Arizona, and also Brewer, Maine. These are existing locations that we are moving into larger headquarters. We will be signing leases in the next few months in the New Jersey area and also in the Mississippi area 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 New York is on the verge of going adult use. But once again, when states go adult use, there is an extremely long lead-time before licenses are issued, before the laws are written. You're seeing that New Jersey right now, you're seeing in South Dakota, Mississippi. When laws change, it could be up to two years before you see plants in the ground and building starting. 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. The amount of licensings that are that are given out, whether there's craft licensing, whether home-grower rules. So, we will know much more 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 in additional 24 licenses with craft licensing. We're still looking for a little more clarification and some ink on the Bill that's going to end up into law.

Okay, great. And then then the last one for me, I just wanted to clarify on private label sales, kind of 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, our private label sales. We will be our second largest distributor this year manufacturer. So, we do believe that GrowGen sales, we will be the second leading product suite that we sell this year. So, as our as our reliance upon some of our distributors and manufacturers lessen. We were at 51% in 2019; we dropped to 41% in 2020. And we see that -- we see that mix dropping into the 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 in the distribution of manufacturing sectors out there.

Excellent. Sounds great. Thank you guys.

Thank you, Mark.

Next question comes from Andrew Carter at Stifel. Please go ahead.

Hey, thanks. Good morning. I wanted to start off and kind of circle in on you mentioned the boat stuck at the port. It's kind of a pretty honors input cost inflation environment. You got a good position in the value chain to absorb it, but I don't know how you're thinking about that first as a headwind. I don't know if manufacturers are trying to pass along pricing. 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 freight here in the U.S.?

Andrew one of the things port disruption and supply chain disruption has been a positive for GrowGen in certain ways, 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 million of inventory at its warehouses. We can ship anywhere in the country, we have distribution around the country. So, it's what's starting to happen right now as this industry evolves. From the small home grow really into big Ag; GrowGen is the group that is a 100% capable of servicing each and every grower out there. We've gotten ahead of port disruptions; we've gotten ahead of COVID. Our warehouses are stocked and we understand product and we have relationships with every vendor out in the country right now. 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 at the start of 2021. So, we're pretty confident in our product suite right now and we are 100% capable of servicing each and every one of our customers. As for you know, again, inflation with shipping, we are seeing it and we are passing it along. We are eating some of it. But 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, how should we be thinking about kind of the free cash flow from the store. I mean, there's not too many new store openings, it looks like it's more upgrades, might be more maintenance. I know that working capital consistently come down for you guys, that you've leveraged the national network, any kind of puts in takes of how we should think in free cash flow for the year? Thanks.

Well, we've been -- I mean, we've -- in all of our acquisitions so far, we've been very successful in increasing the amount of revenues that process through each store 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. Our purchasing power gives us better opportunities at better pricing, which of course flows right to each and every store, which improves our cash -- free cash flow and then improves our margins, which affects our cash flow. And you're starting to see -- as you see, same-store sales are up significantly without an increase -- incremental increase in store operating costs. So, we're getting tremendous leverage off the revenues that are being driven through the stores without a substantial -- in any way, substantial increase in the normal operating cost of a store. So, the revenue, the operating income from store operations, as a percentage of revenues continues to improve.

Thanks. I’ll pass it on.

Next question comes from Eric Des Lauriers at Craig Hallum Capital Group. Please go ahead.

All right, great, thanks for taking my questions, guys. So wanted to focus in on these -- on the impact of these larger stores for a moment, can you talk about how we should expect those to impact gross and EBITDA margins? Obviously, on the revenue side, you should get 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.

Yes, Eric, we see it to be similar. You know, we open Tulsa, Oklahoma a year ago, first year in Tulsa, Oklahoma, with it in excess of $15 million in business, really with margins in the high 20s. 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.

Yeah. Okay. Great. And then good to see the progress on the -- continue on the private label front and 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 expanding your portfolio, any specific categories you're targeting or avoiding and any ones that that you're looking to perhaps provide a bit more of a margin lift than others? Thanks.

Eric, we bought Char Coir and PowerSi, as we've announced, these are great additions to our private label strategies. They are proprietary products. These are products that have been in the environment, the growing environment, and they work. They are disruptive in a lot of ways in terms of their performance. 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 to make strategic acquisitions of these products. So, we're leveraging the scale of GrowGen. And because we're in, 52 locations, across 12 states we see different environments, we see what's working. And we can take advantage of that from an acquisition strategy perspective, that's exactly what we did with PowerSi. It's exactly what we did with Char Coir we saw these two products start to really grow within the portfolio of GrowGen stores. And we said, these are very interesting trends. And we identify them as really products that would be great additions to our private-label strategies. 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.

Thank you. The next question comes from Mike Baker at D.A. Davidson. Please go ahead.

Thanks, guys. So, I wanted to ask one sort of [technical difficulty] 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 talk about what you see in terms of states, adding not just more states, adding the ability for these products, but 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? And then from a company specific standpoint, I'm 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 for the year. But you are making some changes to the website? How do you think about your online penetration going forward? How important do you think that will be? Or is this more of a retail concept rather than an online concept? Thanks.

Yes. This is Darren, I'll start off and then I'll pass it to Michael for the online portion of it. You know, it's our belief as you're seeing sea change, change in laws around the country, you start looking into the more act and certainly, some of the rumblings from the governor's around the country. It's GrowGen's belief that you'll see more open licensing around the country. As you're seeing out West, as you're seeing in Oklahoma, or some of the proposals coming out of Mississippi, we do believe you'll see much more craft growing going around the country, you'll see licensing opening up with certainly, federal legislation changes. 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. But we do believe from listening to you know, 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. One of the interesting parts right now, Michael, what you're seeing -- you're seeing a $20 billion cannabis business that the proponents are stating that'll be $100 billion by the end of 2030. So you're talking [technical difficulty] over the next nine 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. When you look back three years ago now coming out of 2018 GrowGen was a $30 million business. You're looking right now at guidance this year of 415 to 430. And again, with some more acquisitions, and a little more, a little more clarity from states out there, those numbers probably will be going up. So you're seeing almost 14x in revenue in three years. And this is an industry right now that certainly has a lot of rules and regulations in it. 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. When you're looking at the other side of the business [technical difficulty] growth this tremendous competition was certainly take much longer to change. So, GrowGen can get to any new state within three to six months of laws changing or something that we feel more comfortable with. 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 -- this controlled environmental Ag, you're seeing indoor growing, you're seeing technology solutions, or you're seeing that GrowGen is understands the solutions, understands how to build out facilities. The days of the small hydroponic stores are going away. This is big technologies solution providing. So, it's twofold. One, we build the facilities help build the facilities and output the facilities. But then we service the facilities. There's changing products, there's more energy efficiency, water efficiency, growing hydroponically indoors, you're saving 90% of water usage. So what you're seeing right now is really the emergence of new industry is controlled environmental Ag, it's technology based. So the days of looking at GrowGen as a retail store, those days are [technical difficulty] efficiencies, we're solution provider right now. We understand the industry, this is a new breed. And we're excited to be the leader of it. And we will see -- we see tremendous change on the technology sides coming out. As this industry scales, we also believe it's going to scale into urban growing, but you're so used to have, app harvests speaking the other day. Growing out these facilities is you know, it's not for the faint of heart. It's complicated, and growth, technology and the staff to deal with. With that, I'm going to pass it over to Michael to get into the online side of it.

Yeah, Michael, we're building a brand. We are the destination for hydroponic equipment. And as evidenced by the amount of traffic our website is getting, we attracted 1.2 million unique visitors, we transacted from 6,300 transactions last year to 17,000. And that website also has influence the amount of walk-ins you know, as Darrin reported, we're now at over 100,000, walk-ins per month to a GrowGeneration location. The strategy for our online is omni-channel. We're building the symbiotic relationship between the online transactions and our stores. So it's an integrated solution, it's an omni-channel solution, giving our customers optionality, 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, 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. And we're certainly giving our customers, flexibility to transact in any way that they desire to transact with the company. Further, we identify, AgMon is an acquisition, because we realized that, large commercial cultivators purchase differently, it's a business-to-business platform. It's a different curation of product. And they had a really good, platform that we felt we could build upon and really enhance it with our commercial operation. So, that's a separate online strategy, which we're going to be integrating and taking that platform on and growing it from where they are today, and bringing our commercial division and integrating those two entities. But it's really about building a brand and giving customers optionality on how they want to transact with the company.

Yeah. That makes sense. And thank you for those 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 point 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 it's 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 the share of cannabis that is done through hydroponics right now and what that could go to over time? Thanks.

You know, 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 trillion market right now, 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, 425 million kind at the midpoint of range this year. That's in 12 states. We do believe that the East Coast will mimic the West Coast one of these days with tremendous, tremendous opportunities. And we do see right now is new states for GrowGen are states that we will dominate and control. We will right now the 12 states we're in. We're in states that are mature states with much -- with 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 each 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, and also the gardening side of it and the urban growth side of it, we think we will be a tremendous leader on that side of the industry also. As we all know, right now, climate control. Right now climates are changing; growing Outdoors is becoming more difficult in certain states. There's water issues in California has always been. You go over and look in Europe right now, they're growing much more indoors and outdoors just greenhouses strong all over the Holland and everywhere else, you're not seeing that back here. But when you look at some of the weather changes, even this year, if you look at Texas, if you look at the fires in California, there's going to be sustainability issues going on a go forward basis. And we do believe that 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. But building out sustainable greenhouses, you're talking airflow, you're talking fertigation system, you're talking benching systems, lighting systems. It's complicated. And it's certainly -- we're solution provider, we understand it. And that's why we're hiring best of breed individuals to work at GrowGen. Our staff right now we're 600 strong. We've had no turnover at GrowGen. This -- we're building a company for the future. We're investing building a scalable iconic brand right now. People know GrowGen. And it's just starting. People know it. And people are asking [technical difficulty] basis, we get calls on a daily basis to open stores in different states, open stores in different parts of states. Hey guys listen, I got to travel an hour and a half, two hours to get to a GrowGen store, can you open a store, please buy us on. So when we looked through this decade, we believe there's going to be hundreds of GrowGen stores around [technical difficulty] we're going to be a gardening store. We're going to be a solution for anyone that wants to grow a plant, 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. 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 is 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.

Yeah. I appreciate all the color. That's a very complete answer. I appreciate it. Thank you.

You're welcome.

Next question comes from Scott Fortune at ROTH Capital Partners. Please go ahead.

Yeah. Good morning. Thank you for the questions. Can you provide a little color on the M&A transaction side kind of what type of deals you're still seeing? 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 grown for kind of evaluations or what type of deals you're seeing from that standpoint?

Yeah. Scott, we see the next two years, certainly on the acquisition front, and that certainly will slow after that. We see right now another $200 million of acquisitions in our pipeline that we will be looking to complete over the next two years. But after that, you'll see much more Greenfield income GrowGen, most of the acquisitions that you're -- that you will see from GrowGen are going to be in the existing 12 states that we are in continuing 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. As we continue to -- as we -- as our same store sales continue to grow state by state in the existing 12 states we're in.

Okay. I appreciate that. And then to kind of expand upon the last question a little bit, your commercial and e-com is about 30% of business, it's only moved up a little bit. It sounds like that will stay flat. But are you seeing more vertical farming on the technology side, you mentioned that it seems as interstate commerce comes on board and these larger commercial growers will look to grow outside, but they all need more indoor facilities, they're more high quality consistent grows from that standpoint, kind of talk to us on the next technology generation of vertical farming, stackable units, led kind of technology that's being adopted?

Yeah. 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, and the products that we offer are certainly applicable across both of those vertical markets. And it really starts with lighting, 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, dosing, environmental control, controlling the inputs that [technical difficulty] standardization creating profitable growth for our partners. That's what GrowGen delivers, day in and day out and we do that today. And we're looking at technology. We're looking at products that provide automation to create more efficiency, so that our partners are more profitable. And that's the leadership. We are thought leaders in that area. 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 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 [technical difficulty] a solution that we think can be scaled standardize and deliver what our partners, our growers are looking for, which is standardized, scalability and sustainable automation that allows their growers and their operators to deliver return on investment and the highest yields to deliver the greatest product and that's what GrowGen is mission. 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.

Next question comes from Aaron Grey at Alliance Global Partners. Please go ahead.

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 the commercial business and growth there. So we'd love to get an update in terms of where you guys are standing with some of the business with the multi-state operators, and how those efforts there are continuing to grow, right, because you guys obviously do a phenomenal job and the markets that are more mature and have a lot of licenses. But just as you're talking about those East Coast markets may be evolving from limited license to the to the more broader license markets, and how are you looking to also capitalize on the limited license markets and expanding that market share with the MSOs and then kind of give us some of the pitch that you guys are giving to MSOs in terms of ways to start working with GrowGen, and then who they might be working with otherwise, if they're not working with you right now? Thanks.

So Aaron, our commercial division this year did $48 million versus $17 million, up 189%. We're trending to $100 million this year. And 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 and 2020. Today, as of March Q1, we're servicing almost 1,300 commercial customers. So that number constantly is growing. And the reason why we're attracting the MSOs is that we’re one of the few companies that has the infrastructure, the supply chain, the inventory, but it's the right inventory, the inventory that these large commercial companies are seeking its terms, its business-to-business, its GrowGen investing in technology like Agron 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, which is across the board, more commercial customers, more revenue that we're gaining more market share that we gain market-to-market, and it's expanding, because there are more licensed growers, there's more expansion, these MSOs are adding on which is all incremental business that GrowGen is gaining

Wonderful color there. Thanks for that. And the second question for me. So as you guys continue to grow and scale and also become less reliant 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 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 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? Thanks.

Yes, Aaron, I think the word less reliant is, again, is certainly is not what we're looking for. 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 continue to innovate, and sell best of breed products, this industry right now, as I spoke about earlier, to controlled environmental AG, the industry right now, the cannabis industry, there's a bunch of different parts of it. One is the Home Grow. So the Home Grow, again, is certainly less demanding than you're seeing from those single state operators up to the large MSOs. So, there's a lot of different divisions of this industry right now, some of it equates much more to the, again, the home markets with that are not -- that use different products, some of them that large MSOs do in the large single state operators. I only could tell you back in 2014, when I started in this industry, when you walked into a Grow facility, plants were on the ground, individuals were running around, watering plants, feeding plants, there was no standardization within these Grows. If you walk into a Grow right now, I mean, you'll be -- it's fascinating, when you really see the complexity of what's going on in this Grows. The two biggest inputs right now, for the large MSOs and single state operators are manpower and electricity. And right now, what you're seeing is a tremendous shift right now for looking for more sustainable products to grow. So for GrowGen, as long as best of breed products are on the market, we're going to continue to buy it.

Right. Great. Thanks. And best of luck in 2021.

Thank you, Aaron.

Thanks, Aaron.

Last question comes from Glenn Mattson at Ladenburg Thalmann. Please go ahead.

Hi, guys. Thanks for taking the question. So going back to the Agron, you know really interesting acquisition, makes a ton of sense. I'm just curious the -- it's a bit different from what you've typically acquired in terms of acquiring stores or private label products. You talked about this is like a platform. There's like a service component of it. I'm just getting -- I’m just curious if I get a sense for and you talked about I think $20 million in revenue this year to GrowGen. So maybe you can give us a sense of 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, 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 -- or I don’t know or maybe they're doing it now, just more color about that that would be great?

Hey, glad to start with, the transaction has closed. It closed Monday of this week. We certainly see it scalable with our commercial division. Once again, as we've said, we're bringing best of breed products to our customers. We're a solution provider. We look at the Agron.io website as a solution provider for our commercial customers. It's giving them end-to-end look into inventory, into purchasing to manage what they're purchasing. It’s for some further more complex individuals [technical difficulty] with technology from our individual stores or individual management team. [technical difficulty] right now is expected to do the $20 million in additional revenue, they have different clientele then our commercial team. I mean, we do believe that we will continue to grow this business and it will be a tremendous add-on to our commercial team and we’re taking to our commercial customers.

That's helpful. And I think color on the valuation and how you came to that valuation?

It comes with the same valuation about most of what we buy right now. We're buying stuff half time sales, three to five times EBITDA. 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. And I think you'll see that -- you'll see the Agron website continue to flourish, especially with our distribution around the country. Agron has in the past distributed from our suppliers and manufacturers, they will now have the option also to distribute through our warehouses and through to our distribution centers.

Great. Okay. Thanks for color. Good luck this year.

Thank you.

Thanks, Glenn.

Thank you. There are no further questions. I will now turn the call back over to Darren Lampert for closing comments.

I'd like to thank our customers, shareholders, and each and every employee at GrowGen. They have worked tirelessly this year through COVID. And again, I couldn't be any prouder of our team and what we've accomplished in 2020, what we've accomplished in the first quarter of 2021. 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. 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. 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. Tony Sullivan, our new Chief Operating Officer, who's been with us for about a year and a half now has done a tremendous job, integrating transactions and bringing this staff up to speed on the philosophies of GrowGeneration. I want to also thank Monty Lamirato. Monty started with us, we were at a $7 million run rate. He leaves us four years later at over $400 million. 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. 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. We see such tremendous growth for so many years. We see tremendous research going into the plant. And we do believe that with loosening of legislation, you will see much more consumption in the future, much more plants being grown both on the cannabis side [technical difficulty] the fruit and vegetable side of it. I couldn't be any prouder to be at the helm of GrowGeneration. It's been a wonderful eight years and 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 [technical difficulty] this team is up early in the morning and works late at night. And we look forward to sharing our successes in our first quarter with you in the middle of May. Thank you so much. Stay safe and get your COVID shots.

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