GrowGeneration (GRWG) Q2 2026 Earnings Call Transcript

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DATE

Tuesday, Aug. 11, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Co-Founder and Chief Executive Officer - Darren Lampert
• Chief Financial Officer - Gregory Sanders

TAKEAWAYS

• Revenue -- $43.2 million, representing a 5.5% increase versus $41 million during the same period last year.
• Adjusted EBITDA -- $300,000, representing a $1.6 million year-over-year improvement from a loss of $1.3 million.
• Net Loss -- $2 million, or $0.03 per share, which was an improvement from a loss of $4.8 million, or $0.08 per share, in the second quarter of 2025.
• Proprietary Brand Sales -- 39.7% of cultivation and gardening revenue, increasing from 32% last year due to the strategic focus on higher-margin recurring consumables.
• Cultivation and Gardening Revenue -- $34.9 million, compared to $32.9 million in the prior year, driven by commercial B2B sales and increasing adoption of proprietary brands.
• Storage Solutions Revenue -- $8.3 million, up from $8.1 million last year, as the segment continues to diversify into industrial, agricultural, and specialty end markets.
• Gross Margin -- 28.5%, representing a sequential improvement of 310 basis points from 25.4% in the first quarter of 2026.
• Store and Other Operating Expenses -- $6.1 million, a decrease of 21.9% year over year resulting from the company's store footprint optimization.
• Total Operating Expenses -- $14.7 million, down 13.1% versus $16.9 million in the second quarter of 2025.
• SG&A Expenses -- $6.5 million, a 5% increase from $6.2 million last year, reflecting investments in the commercial sales structure and growth initiatives.
• Depreciation and Amortization -- $1.5 million, declining 44% year over year as certain assets reached the end of their useful lives.
• Cash and Marketable Securities -- $41 million at the end of the quarter, with management reporting no outstanding debt.
• Stock Repurchases -- 700,000 shares, purchased at an average price of $1.38 per share during the second quarter.
• Share Repurchase Authorization -- $9 million remaining as of June 30, 2026, from the total $10 million program approved by the board.
• Full-Year 2026 Revenue Guidance -- $162 million to $168 million, which was reaffirmed by management based on performance to date.
• Full-Year 2026 Adjusted EBITDA Guidance -- $2 million to $3 million, an increase from the previous expectation of approximately breakeven.
• Third-Quarter Revenue Guidance -- $44 million to $46 million, with management expecting to maintain positive adjusted EBITDA during the period.
• Anticipated Tariff Refund -- Exceeding $2 million, expected to be recognized in the third quarter relating to previously incurred IEPA tariffs.
• Proprietary Brand Target -- 40% of cultivation and gardening revenue, a goal management reached mid-year versus the original year-end target.
• Retail Store Footprint -- Management reported operating with approximately 25 fewer locations compared to previous periods as part of the company's restructuring.
• Sequential Growth -- Net sales improved 12.6% compared to the first quarter of 2026, marking the third consecutive quarter of year-over-year revenue growth.

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RISKS

• Sanders stated, "Storage Solutions gross profit dollars declined modestly due to project mix, and rising transportation costs during the quarter, despite higher sales volume," acknowledging specific margin pressure in the storage segment.

SUMMARY

Management reported that the company's transformation focused on expanding the commercial platform, increasing proprietary brand sales, and maintaining a disciplined cost structure. The company achieved positive adjusted EBITDA for the quarter, which management attributed to operational improvements and an emphasis on higher-margin revenue quality. Full-year 2026 adjusted EBITDA guidance was raised from a previous expectation of approximately breakeven to a range of $2 million to $3 million. Management stated that the debt-free balance sheet and cash reserves of $41 million provide flexibility for continued infrastructure investment and opportunistic share repurchases.

• CEO Lampert stated that proprietary brand penetration reached the 40% year-end target mix halfway through the year, driven by increased adoption of brands such as CharCoir and Drip Hydro.
• CFO Sanders indicated that the Storage Solutions segment provides a diversified revenue stream outside traditional cultivation markets through industrial, agricultural, and specialty projects.
• On the call, Sanders stated that third-quarter results are expected to include an IEPA tariff refund exceeding $2 million, a primary driver for the upgraded adjusted EBITDA guidance.
• Management reported that 90% of proprietary brand sales currently flow through the company's commercial division and GrowGen-centric channels.
• CEO Lampert stated that while the company is evaluating acquisitions, it is "not looking to buy revenue" that cannot be successfully integrated with accompanying earnings.
• Management reported that the GrowGen Pro digital B2B platform has strengthened relationships with multistate operators and greenhouse growers across North America.
• CEO Lampert indicated that the company is increasing its investment in technical advisors and growing protocols to improve the quality and cost-efficiency of customer cannabis production.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-GAAP financial metric that calculates earnings before interest, taxes, depreciation, and amortization, further adjusted for certain non-cash or non-recurring items.
• Proprietary Brands: In-house product lines developed and owned by the company, such as CharCoir, Drip Hydro, and Power Si, which typically offer higher margins than third-party products.
• MSO: An acronym for multistate operator, referring to companies authorized to grow and sell cannabis across more than one U.S. state.
• Hydroponics: A method of cultivating plants without soil, using nutrient-enriched water solutions.
• Durable Goods: Non-consumable capital equipment sold by the company, including lighting systems, storage shelving, and environmental controls.
• IEPA: A category of international trade tariffs for which the company expects to receive refunds for previously incurred costs.

Full Conference Call Transcript

Operator: Hello, everyone, and welcome to GrowGeneration. Second Quarter 26 Earnings Conference Call. My name is Melissa, and I will be your operator for today's call. At this time, participants are in a listen only mode. Following prepared remarks, we will open the call to questions from analysts with instructions will be given at that time. This conference call is being recorded and a replay of today's call will be available on the Investor Relations section of GrowGeneration's website. I will now hand the call over to Phil Carlson, with KCSA Strategic Communications for introduction and the reading of the safe harbor statement. Please go ahead, sir.

Phil Carlson: Thank you, operator, and welcome, everyone, to GrowGeneration's Second Quarter 26 Earnings Results Conference Call. With us today from GrowGeneration are Darren Lampert, Co-Founder and Chief Executive Officer and Gregory Sanders, Chief Financial Officer. Company's second quarter 26 earnings press release was issued after close of market today. A copy of this press release is available on the Investor Relations section of the GrowGeneration website at ir.growgeneration.com. I would like to remind everyone that certain comments made on this call include forward looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 2000.

These forward looking statements are based on management's current expectations and beliefs concerning future events, and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any of the forward looking statements made today. During the call, we will use some non-GAAP financial measures as we describe business performance.

The SEC filing as well as the earnings press release, which provide reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are all available on our website. Following the prepared remarks, management will be happy to take your questions. We ask that you please limit yourself to 1 question and 1 follow-up. If you have additional questions, please reenter the queue, and we will take them as time allows. Now I will hand the call over to GrowGeneration's Co-Founder and CEO, Darren Lampert. Darren? Please go ahead.

Darren Lampert: Thanks, Phil. And good afternoon, everyone. Thank you for joining us to review GrowGeneration's second quarter 26 financial results. And to discuss our outlook for the rest of 2026. I am pleased to report that our sales momentum in early 26 continued into the second quarter. This marks our third consecutive quarter of year over year revenue growth. Following the actions we have taken over the past few years, as part of our larger strategy to transform GrowGeneration into a commercial proprietary brand-driven business. This growth strategy is centered around 3 key priorities. Expanding our commercial platform growing our proprietary brands and maintaining a disciplined cost structure. Our expanded commercial B2B business is a core growth driver of our strategy.

Through our digital, B2B platform, GrowGen Pro, we have strengthened our relationships with both single and multi state operators greenhouse growers, and many other commercial cultivation customers throughout North America. These customers recognize the value we provide with many of them adopting our products and growing protocols into their operations. Another key component of our strategy is growing our proprietary brands across additional channels. Aside from building stronger brand loyalty. Proprietary brand sales also represent higher margins reoccurring consumable purchases and create greater competitive differentiation. For GrowGen in the marketplace. Our efforts have been very successful. As we continue to see increased adoption of proprietary brands such as CharCoir, Drift Hydro, The Harvest Company, dialed in and Power SI.

With this strategy, we set certain goals for ourselves. In 26. Including proprietary brand penetration reaching 40% of cultivation and gardening revenue. By year end. Based on our performance to date, we have updated our full year adjusted EBITDA goal and now expect to generate adjusted EBITDA in the range of $2 million to $3 million This is significant for GrowGeneration. As it shows the progress we have already made as well as the ongoing evolution of our business as we set the bar higher to keep driving revenue growth reduce costs, and improve margins. Now let's look at our second quarter results. We generated total revenue of $43.2 million which was in line with our expectations.

And represents both sequential and year over year growth. Even as we operated with a smaller retail store footprint. We reported proprietary brand sales representing approximately 40% of cultivation and gardening revenue. Compared to 32% in the same period last year. So, we are already at our year end target mix just halfway through the year. In addition to reaching this target, these results represent our progress in building a more focused commercially driven and profitable business. We have continued to transition our sales towards higher value recurring consumable proprietary branded products. Expanding proprietary brands is central to our margin expansion and long term value creation strategy and we are very pleased with our progress.

Our MMI Storage Solutions segment also delivered solid results this quarter. With $8.3 million in revenue, MMI continues to benefit from higher capital investment activity and its diversification into industrial, agricultural, and specialty end markets. We expect this segment will continue to generate steady growth throughout the remainder of 2026. All this has contributed to expanded margins. For the second quarter, we achieved gross profit margins of 28.5%, a sequential improvement of 310 basis points from 25.4% last quarter and compared to 28.3% last year. Turning to expenses for the quarter. We reduced store and other operating expenses by approximately 22% year over year and total expenses by 13%.

These results display the considerable benefits we have achieved from the increased efficiency and cost reduction initiatives that we have been implementing over the past several years. All of this contributed to GrowGen, achieving positive adjusted EBITDA for the second quarter. As I mentioned earlier, this is an important milestone for us. Aside from increased profitability, it demonstrates the value we have created through our strategic initiatives as we continue to transform ourselves into a stronger business with increased growth prospects. I am not just talking about the operational improvements we have made. I am also talking about our emphasis on revenue quality. We are growing higher margin sales as part of our revenue mix, particularly through our proprietary brands.

Also attaining positive adjusted EBITDA this quarter has now led us to reach even higher as we have raised our full year 2026 adjusted EBITDA goal to the range of $2 million to $3 million As part of this strategy, we have also continued to maintain a strong balance sheet. Today, we possess the strongest balance sheets within our industry. This financial flexibility gives us a considerable competitive advantage as we seek further infrastructure projects and take steps to increase our proprietary brand expansion. At quarter end, we had $41 million of cash while having no debt. We have the resources to keep investing in our growth initiatives. While still maintaining disciplined capital allocation.

This financial strength also supports our stock repurchase activity. During the second quarter, we repurchased 700 thousand shares of common stock at an average price of $1.38 per share. Regarding our forward outlook, for the third quarter of 26, we anticipate revenue of between $44 million to $46 million At the same time, we expect to generate positive adjusted EBITDA for the quarter. This gives us the confidence to upgrade our full year 2026 guidance. Which includes net revenue in the range of $162 million to $168 million and adjusted EBITDA in the range of $2 million to $3 million for the full year.

Before I turn the call over to Gregory, I want to give some perspective on the latest developments around Schedule 3 rescheduling for adult use cannabis. Since our last earnings call, the ALJ concluded its formal hearings While a ruling is still pending, we are confident that regardless of timing, GrowGen is well positioned to support increased investment activity from our customers. We believe there is no other organization better suited for this. With our growing portfolio, of proprietary brands, infrastructure builds, and system integrations longstanding customer partnerships, and our talented and seasoned management team. All of this is supported by our industry leading balance sheet and proven track record of execution. That concludes my remarks.

Now I will turn the call over to our CFO, Gregory Sanders.

Gregory Sanders: Thank you, Darren, and good afternoon, everyone. I will begin with a review of our second quarter 26 results and then I will provide additional context on our outlook for the year. Our second quarter results represent another forward in the transformation of GrowGeneration. We delivered our third consecutive quarter of year over year growth continued expansion of proprietary brand penetration, delivered positive adjusted EBITDA and maintained the disciplined cost structure that we have built over the past several years. These results reflect continued execution against the strategic priorities that we have outlined to investors.

For the second quarter of 26, GrowGeneration reported net sales of $43.2 million an improvement of 12.6% sequentially and an increase of 5.5% compared to $41 million during the same period last year. Revenue growth continues to be driven primarily by our commercial B2B business and increasing adoption of our proprietary brands. Both of which remain strategic priorities for the company. Net sales in our cultivation and gardening segment were $34.9 million for the quarter compared to $32.9 million in the same period last year. Proprietary brand sales represented 39.7% of cultivation and gardening revenue, up from 32% in the prior year.

This was mainly driven by our strategic initiative to increase our sales mix of higher margin proprietary products, Higher proprietary brand penetration continues to improve the quality of our revenue by increasing gross profit dollars and reinforcing our long term margin expansion strategy. In our storage solutions segment, net sales were $8.3 million for the quarter, up from $8.1 million in the second quarter of 2025. Storage Solutions continues to provide an increasingly diversified revenue stream outside of traditional cultivation markets. We continue to see healthy customer demand across retail, industrial, and commercial infrastructure projects, reflecting ongoing in warehouse modernization and automation. This diversification helps reduce earnings volatility while providing additional opportunities for profitable growth.

Gross profit was $12.3 million for the second quarter of 26, compared to $11.6 million during the same period last year. In cultivation and gardening, gross profit increased year over year primarily due to increased sales volume and a higher mix of proprietary brand products. Storage Solutions gross profit dollars declined modestly due to project mix, and rising transportation costs during the quarter, despite higher sales volume. Total company gross margin was 28.5%, compared to 28.3% last year. The improvement reflects the continued expansion of proprietary brand sales within our cultivation and gardening segment. Partially offset by higher transportation costs. Now turning to expenses.

In the second quarter of 26, store and other operating expenses declined by approximately 21.9% to $6.1 million compared to $7.9 million in the second quarter of 25 reflecting the benefits of our cost reduction initiatives. Selling, general and administrative expenses were $6.5 million or a 5% increase compared to $6.2 million last year, primarily due to increases in our commercial sales structure that support our growth initiatives. Total operating expenses decreased by $2.2 million or 13.1% to $14.7 million, compared to $16.9 million in the comparable 2025 period. Depreciation and amortization totaled $1.5 million down $1.2 million or 44% compared to $2.7 million in the same period last year.

The decrease primarily reflects asset retirements related to cost reduction initiatives and certain intangible assets reaching the end of their useful lives. GAAP net loss decreased to $2 million, or negative $0.03 per share a $2.8 million improvement compared to a net loss of $4.8 million, or negative $0.08 per share in the prior year period. The improvement was primarily driven by reduced operating expenses, revenue growth and lower depreciation and amortization. In the second quarter, as expected, we returned to positive adjusted EBITDA. Non-GAAP adjusted EBITDA as defined in our press release, was a positive $0.3 million, a $1.6 million year over year improvement compared to a loss of $1.3 million in the prior year.

Returning to positive adjusted EBITDA, marks an important milestone in the transformation of GrowGeneration. Over the past several years, we have sustainably reduced our cost structure. Improved operating leverage, and positioned the business to return to sustainable profitability as revenue continues to recover. Now turning to the balance sheet. We ended the quarter with $41 million of cash, cash equivalents and marketable securities and no debt. Our debt free balance sheet continues to differentiate GrowGeneration within the industry and provides us with significant flexibility to invest in organic growth evaluate strategic opportunities, and opportunistically return capital to shareholders.

Earlier this year, our Board of Directors authorized a share repurchase program of up to $10 million of the company's outstanding common stock. Reflecting the Board's confidence in the long term intrinsic value of the business and our commitment to disciplined capital allocation. During the second quarter, the company repurchased 700 thousand shares of common stock at an average price of $1.38 per share exclusive of incremental direct costs, As of 6/30/2026, approximately $9 million remained available under the stock repurchase program. We intend to execute the program opportunistically during the remainder of 2026 subject to market conditions, capital allocation priorities and applicable securities law. Now turning to our outlook.

We are raising our full year 2026 adjusted EBITDA guidance while reaffirming our revenue outlook. We continue to expect net revenue in the range of $162 million to $168 million and now expect adjusted EBITDA in the range of $2 million to $3 million for the full year compared to our previous expectation of approximately breakeven. The increase reflects our strong execution year to date continued focus on revenue quality, proprietary brand penetration, disciplined cost management, and the expected recognition of previously incurred IEPA tariff refunds during the third quarter For the third quarter, we expect net revenue in the range of $44 million to $46 million while continuing to generate positive adjusted EBITDA.

As we look ahead, we believe GrowGeneration is, operating from a position of strength. We have returned the business to revenue growth. Materially improved profitability maintains a strong debt free balance sheet, and continued to execute a disciplined long term strategy. While there is still work ahead, we believe the progress we have made over the past several years has established a much stronger foundation for long term shareholder value creation. With that, I will turn the call back to Darren for closing remarks.

Darren Lampert: Thanks, Gregory. And thank you again to everyone for joining us today. Overall, we delivered a strong second quarter. Generating revenue growth across most areas of our business expanding proprietary brand penetration reducing costs, and improving profitability. while reaching positive adjusted EBITDA for the quarter. Our performance continues to reflect the benefits of our expanding commercial platform and our improved operations and reduced cost structure. This also enables us to once again end the quarter with a strong balance sheet and no debt. Moving forward, we will remain focused on executing our strategy and continuing our transformation into a commercial proprietary brand-driven business.

We will stay focused on driving continued revenue growth while refining our revenue mix improving margins and expanding our profitability. As we continue to advance towards our year end goal our proprietary brands representing 40% of cultivation and gardening sales and our updated goal of generating full year adjusted EBITDA in the range of $2 million to $3 million As you can see from this quarter's performance, our strategy is continuing to drive improved financial and operating results. And we look forward to keeping you updated as we make further progress during the balance of the year. That concludes our prepared remarks. Operator, please open the line for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, Please press the star followed by the 2. If you are using a speaker phone, please lift the handset before pressing any key. We ask that you limit yourself to 1 question and 1 follow-up question. Your first question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Erin: Hi. Good evening, and thank you very much for the questions. First question for me, just regarding the updated guide, particularly on EBITDA, right? So you guys held sales and gross margin guide, increased EBITDA. It implies $3.3 to about $4.3 million in the back half. So just given the seasonal softness we usually see in 4Q, how much of it is attributable to just a really strong core Mark, maybe less seasonality versus that tariff benefit that you mentioned as well. Thank you.

Gregory Sanders: Hi, Aaron Grey. Thank you for the question. I think first things first, the first 2 quarters gave us a higher level of confidence in the underlying performance of the business. Returning the company to positive adjusted EBITDA in the second quarter along with returning gross margin to 28.5%. And the cost reduction initiatives that we have executed gives us more confidence in the operating model as we move forward. In addition to our comfort around the business and our execution so far year to date, we are expecting an IEPA tariff amount to be recognized in the third quarter that exceeds $2 million.

So that is a primary driver as well for us as we look at the third quarter. We expect generally for the fourth quarter to return to normal levels of performance relative to seasonality and commentary that we have made historically.

Erin: Okay, great. Appreciate that color. Second question for me. Just regarding proprietary brands, you guys already hit your mark for the full year within the quarter. essentially being at 40%. So just given growth accelerated, the quarter, maybe talk about some of the dynamics that drove that growth, maybe deeper penetration within your commercial business and with some of the MSOs that I know you have been targeting? Thank you.

Darren Lampert: Yeah. I think we have been pretty transparent that our commercial business, our MSO business is certainly expanding. We still do believe that we are in the early stages of growth in a bunch of our proprietary brands that are out on the market right now. And we still believe that there is tremendous opportunities on the distribution side of it I would say right now, about 90% of the sales are going through are proprietary brands right now. Are GrowGen centric to our in through our commercial division. So we have high hopes that, you know, as the years go on, that, you know, many other groups adopt our brands within the industry.

So we believe that is just starting, and we are getting way more involved in distribution. Of our brands on a go forward basis and brands are working. You know, we have hired a bunch of technical advisers that are in the facilities on a daily basis. And the brands are really turning out some of the best cannabis in the country right now. Both on the cost side and the quality side. So we could not be any prouder of the team that we have out in the markets right now And really, the work that we are doing to transform the industry, really, the growing better cannabis, at just better levels and better price points. Great to hear.

Thanks for the color. I will go ahead and jump back in the queue. Thank you.

Operator: Your next question comes from Brian with Oppenheimer. Please go ahead.

Brian Nagel: it is Brian Nagel. Nice quarter. Congratulations. Thank you, Brian Nagel.

Darren Lampert: So it is going to be a follow-up to a prior I think it is going to be a follow-up to the prior question.

Brian Nagel: Here, you have had, I guess, now 3 consecutive quarters of positive year on year revenue growth. If you look at the guidance for Q3, again, got the numbers right, you are guiding revenue growth year on year to be down. So is there a-- are you-- is there a breaking trend? Is there a reason for that conservatism?

Gregory Sanders: Hey, Brian Nagel. Thanks for the question. When you look at Q3 of 25, what we executed was a significant volume of durable sales in that period. That created some level of lumpiness in the period last year. In fact, Q3 was a fairly significant outlier for us on a quarterly basis when you look at 2025 in its entirety. I think what you are seeing now in 2026 is maybe less lumpiness where our durables business has generated more consistent results from quarter to quarter. And I think when you look at the guidance that we have in totality for 2026 compared to 2025, we are generally guiding for an up year in contrast to last year.

I think you are just seeing the revenue more even across the periods and less of that onetime exposure that you saw in Q3 of last year. So, generally, we are content with our expectations for Q3 in 2026. In fact, we still expect Q3 to be our strongest performing quarter from a revenue perspective. So although it is down year over year, we still feel very good about where we are at in the year and our forward looking outlook.

Darren Lampert: Brian Nagel, in addition to that, I think on the margin side of it, you will see higher margins in the third quarter of this year than you certainly saw last year. With higher consumable products than durable products. But like anything else, things can change. We may close some additional sales within the third quarter that may bring guidance higher. But right now, it is really just too early to tell. And we still do believe that you will see a much stronger fourth quarter this year than you saw last year.

Brian Nagel: No. that is that is very helpful context. I appreciate all that. Then I give the second question I have, and I guess this is bigger picture. But is-- as we are watching the proprietary brands grow, As you said, it hit from a penetration standpoint, hits your-- your annual target here halfway through the year, so you are well ahead I guess the first 1 I am going to ask as we think that this business is starting to really take hold, By channel, is there are you seeing particular growth in 1 channel I think in the prior question, you mentioned the MSOs. But are you again, is the business growing?

Are you seeing outsized strength in 1 channel And how should we think about the from a channel perspective, where you are selling to proprietary brands over time?

Darren Lampert: I think the channels are pretty broad right now. And, again, mostly on the consumable side of it, And we do believe that with a bunch of our consumable products right now, both under the CharCoir and Drip brand names and also Arvco. That there is considerable growth ahead that we believe that, you know, we are just at the start of private label penetration. In the hydroponic cannabis space. But we do believe that the growth from this industry is just starting in lawn and garden and the ag space. And we think you will see many years of growth to come.

1 of the hardest issues is you are starting from a such a small base So when you are seeing double digit growth, you know, off a couple million dollars, it is just not making it is not making, you know, a big enough impact in our numbers. But as time goes on, we certainly believe that. 1 of the other sides of it, Brian Nagel, when we take a look at, you know, GrowGen today, and the big picture of GrowGen, when you go back to 2024, we lost over $16 million on an adjusted basis. We lost over $6 million last year. And this year, we are looking positive $2 million to $3 million on an adjusted basis.

We have picked up almost $18 million. with about over 25 fewer locations. So, you know, at this rate, if we continue this rate for a couple more years, you are going to see quite an impact on the growth side of it. And also on the EBITDA side of it, which really excites us. We have done an incredible job, I believe, you know, in reformulating GrowGen and reorganizing it to really, to a-- to a-- to a business to business company that is driven by product and technical support. And it is what the industry needs right now. And we still believe that, you know, again, better years are here to come. that is very helpful.

I appreciate the color, Darren. Thank you. Thank you, Brian Nagel.

Operator: Your next call comes from Mark with Lake Street. Please go ahead.

Mark: Hi, guys. Wanted to ask first about SG&A. It was more flattish, kind of year over year. I am kind of curious if you got SG&A down to kind of where you want it, and this is a kind of good run rate, Or is there more cuts that you think you can make there?

Gregory Sanders: Yeah. Hey, Mark Smith. Thanks for the question. In terms of SG&A in the third quarter, I think what you have seen from our business is we closed 4 stores in the first quarter. And we have rebalanced some of our costs into more growth initiatives. So we have expanded our sales force on the commercial side. We have put more dollars into marketing. We have added more dollars into trialing our private label products. Across the cannabis space and getting our products into more hands of our core customer. So really, more than anything else, it is a rebalancing when we look at 3Q or excuse me, second quarter. In comparison to prior quarters.

Now, in terms of the go forward we are continuing to look at cost reduction opportunities, primarily on the store side. And we see SG&A as the kind of core driver of a lot of our growth initiatives on both the commercial side as well as with our proprietary brands. So we generally expect SG&A to remain in the low sixes in the back half of the year. So relatively consistent, maybe incrementally down compared to what you saw in the second quarter. But it is generally a stable area for us at this point as we continue to focus on returning to growth in the business.

Mark: Perfect. And then I wanted to ask about capital allocation. Your balance sheet continues to be a really good spot here. You started buying back some stock. I am curious kind of as we think about M&A, reinvestment in the business, returning cash to shareholders, kind of how you look at allocating, some of this cash.

Darren Lampert: You know, Mark Smith, I think we have been pretty transparent If the right transaction, you know, came, we were certainly buyers within the industry. Even outside the industry when it goes into the ag and lawn and garden space. We just have not found the right transaction for GrowGen right now. And, you know, as I have also said in the past, you know, we have spent the last 3 years restructuring GrowGen. And spending an enormous amount of time getting our ducks in order. So, you know, we are, you know, we are out looking right now. But, you know, without the right transaction, we are not looking to buy revenue.

That, you know, that we cannot integrate into this company and earnings coming with it. So, you know, right now, we are quite comfortable with the cash in the bank. We are getting a little more aggressive on the loaning side of it. On some of the deals that we are working on CapEx. that is a wonderful part of our business right now. And we believe a growing part of our business We have been quite conservative with lending money on the CapEx side of it. But, again, you know, we certainly are out there. Looking for the right transactions on that side of it. And we will continue to buy back stock.

You know, we have a $10 million stock buyback in you know, at the end of the second quarter. We have used $1 million of that so far. Perfect. Thank you.

Operator: Ladies and gentlemen, that is all the time we have for questions. I will turn the call back over to Darren Lampert. Please go ahead.

Darren Lampert: As you can see from this quarter's performance, our strategy is continuing to drive improved financial and operating results. We look forward to keeping you updated as we make further progress during the balance of the year. Thank you.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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