GrowGeneration Corp. Q1 2026 Earnings Call Summary

Strategic Transformation and Performance Drivers

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• Achieved second consecutive quarter of year-over-year revenue growth despite operating with a significantly smaller footprint of 19 locations versus 31 in the prior year.

• Performance was primarily driven by momentum in the commercial B2B business and a 35.5% revenue increase in the Storage Solutions segment.

• Management is successfully shifting the sales mix toward higher-margin proprietary brands, which reached 37% of cultivation and gardening revenue.

• The company is actively repositioning its legacy retail footprint into commercial sales and service centers to better support large-scale cultivators.

• Operating expenses decreased by 23.4% year-over-year, reflecting the realization of structural cost reduction initiatives implemented over the past several years.

• Gross margins were temporarily pressured by inventory liquidation related to four store closures and a higher mix of lower-margin durable products.

Outlook and Strategic Priorities

• Reaffirmed full-year 2026 guidance with revenue between $162 million and $168 million and a target of approximately breakeven adjusted EBITDA.

• Expects second-quarter revenue of $42 million to $44 million with a return to positive adjusted EBITDA as seasonal demand increases.

• Management targets expanding proprietary brand penetration to approximately 40% by the end of 2026 to drive long-term margin expansion.

• Anticipates gross margins will return to the 27% to 29% range for the remainder of the year as store closure activity subsides.

• The transition of medical cannabis to Schedule III is expected to provide immediate 280E tax relief for customers, increasing their capacity for infrastructure reinvestment.

Operational Risks and Adjustments

• Store consolidation activity in Q1 resulted in a 1.5 percentage point headwind to gross margins due to inventory liquidation and disposal.

• Profitability was impacted by 50% tariffs on CharCoir products, though management expects this pressure to dissipate as new inventory arrives.

• The company maintains a strong liquidity position with $41.1 million in cash and no debt, supporting a new $10 million share repurchase program.

• Management is actively pursuing IEPA tariff refunds, though the timing and amount of potential recovery remain uncertain.

Q&A Session Highlights

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