Good day, ladies and gentlemen and thank you for standing by. Welcome to the Hydrofarm Holdings Group Fourth Quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, March 1, 2022. I would now like to turn the call over to Mr. Fitzhugh Taylor, Managing Director at ICR, to begin.

Thank you, Maria and good afternoon, everyone. With me on the call today is Bill Toler, Hydrofarm's Chairman and Chief Executive Officer; and John Lindeman, the company's Chief Financial Officer. By now, everyone should have access to our fourth quarter 2021 earnings release and Form 8-K issued today after market close. These documents are available on the Investors section of Hydrofarm's website at www.hydrofarm.com. Before we begin our formal remarks, please note that our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Lastly, during today's call, we will discuss non-GAAP measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release. With that, I'd like to turn the call over to Bill Toler. Bill?

Thank you, Fitzhugh and good afternoon, everyone. We're pleased to cap off a successful 2021, with a fourth quarter that includes a revenue growth of over 26%, while our Q4 was impacted by the previously discussed short-term agricultural oversupply of cannabis. When you take a step back, there's no doubt we have made significant progress reconfiguring our portfolio during the year to further establish Hydrofarm as a leading branded manufacturer and distributor within the fast-growing controlled environment agriculture industry and we believe we've set the company up for long-term success. Let's recap some of the highlights of the full year 2021. We posted total growth of over 40% in 2021 via significant organic growth, plus acquisition-related growth. Our organic growth was over 18% for the year, very much in line with our long-term historic growth trends. I would also note that on a 2-year basis, our full year organic growth was over 72% in aggregate or about 31% on a compounded annual growth basis. This represents a period of strong expansion in the industry with growth rates a little above our long-term historic norms. Secondly, we successfully completed five acquisitions in 2021 that helped to reshape our product portfolio. As a result of these acquisitions, on a pro forma full year basis, 77% of our sales come from proprietary and preferred brands compared to just 66% last year. In addition, on a pro forma basis, the consumable portion of our portfolio is now about 68%, up from 65% last year from a product mix standpoint. And more than half of our sales now come from our own brands. And we produce, manufacture in-house about 40% of that revenue, up from only 10% a year ago prior to our acquisitions. Third, we successfully completed three financings in 2021 to enable these acquisitions and better position our balance sheet given the substantial increase in size and scope of our business. Fourth, we relocated and expanded several of our distribution centers which, on a combined basis with our recent acquisitions, had the effect of increasing our distribution and manufacturing footprint by over 500,000 square feet, representing an increase of approximately 70%. And finally, we also took numerous actions across the year to strengthen the Hydrofarm platform and team by successfully adding important leadership roles, organizing our ESG effort and publishing Hydrofarm's first Sustainability Report and by bringing our internal controls environment into full SOX compliance in our first year as a public company. Again, these actions redefined our product portfolio, while adding more manufacturing to the value proposition we bring our customers and importantly, improve our overall level of profitability. And perhaps most important of all, these accomplishments better positioned us to capitalize on the continued long-term expansion of controlled environment agriculture in the U.S., in Canada and in locations around the world. With that in mind, I'd like to touch on some of the growth drivers that we believe will benefit our business in 2022 and beyond. First of all, is our IGE acquisition, the one we completed last back in November of 2021. Currently, IGE is carrying significant backlog with customer deposits on our commercial accounts, driven by new state build-outs and vertical rack retrofits. Coupled with our new manufacturing capability and strong line of customized CEA solutions for commercial growers, we believe this will benefit us as the year progresses. That brings us to our commercial channel. In 2021, we continue to successfully build out our commercial sales channel as we tripled our sales from the previous year of 2020. And we're pleased with the strength we are seeing in the commercial segment across the U.S. as we enter this year. Combined with the sales efforts of our acquired brands, we believe this momentum is sustainable and will present us many new opportunities going forward. Another exciting driver in our business are our peat products, peat moss, a segment of Aurora Innovations which we acquired last June, experienced record sales in 2021. And we secured additional bog leases, allowing us to expand our acreage by over 70%. While we expect this expansion to give us some benefit in 2022, we believe we'll fully realize the benefit of that in 2023 and we're very excited about the future of this subcategory. Next and the fourth growth driver is adult-use legislation. In 2021, approximately 75% of our sales came from established adult-use states, with only 20% of our sales coming from medicinal states and only 3% from the new adult-use states. As a result, as these new adult-use states build out, we have tremendous opportunities for growth as we see these medicinal states convert over to adult-use and get fully implemented. New legislation also continues to be an ongoing opportunity for us as recent and upcoming legislation in numerous states provide ongoing growth potential for our business. While some states have been slow to implement their adult-use plans, we expect volumes to build significantly in many of these markets in 2022. All in all, we expect continued acceleration in the cannabis market growth resulting from the state legislative changes and increasing popular support. Finally, in late '21 and early '22, we took further action on several pricing and cost-saving initiatives. On the pricing side, we continue to push through cost increases, where necessary and appropriate. And on the cost savings side, I'll note, by the end of the first quarter of 2022, we will reduce our employee base by about 11% as we start to capture some of the cost synergies from the five acquisitions completed in 2021. We believe these changes are necessary and will be helpful to reduce costs to help mitigate the impact of inflationary pressures. In closing, we remain excited about the long-term outlook for our business. During the past year, we successfully completed great progress in integrating five acquisitions to further strengthen our portfolio. We're expecting increased consumer demand from accelerating legislative support and we have a very unique portfolio as a leading picks-and-shovels supplier to the industry that doesn't touch the plant. In addition, we have a very healthy balance sheet that can support future growth. And while the industry is going through some short-term headwinds, we are very well positioned and have plenty of reasons to be positive in 2022, particularly as we look towards the second half of the year. With that, let me turn it over to John to further discuss our fourth quarter financial results and to provide comments on our full year 2022 outlook. John?

Thanks, Bill and good afternoon, everyone. Net sales for the fourth quarter rose by 26.3% to $110.4 million from $87.4 million a year ago. This increase was mainly driven by the impact of the five companies we acquired between May and November, which contributed 40% to our sales growth in the fourth quarter compared to the previous year and helped mitigate a decline in organic sales caused by weaknesses in several U.S. states, particularly California and Canada. Despite the organic growth challenges in Q4 across various markets, we observed positive momentum in states that recently legalized adult use. Specifically, New York, Missouri, Louisiana, Arizona, and Virginia saw over 100% growth in the quarter, along with strong performance in emerging cannabis markets. The overall volume from acquisitions and organic growth resulted in a 22.8% volume increase in Q4. Our fourth-quarter net sales also benefited from a 2.8% pricing mix improvement as we adjusted our portfolio SKUs and raised prices on those facing higher costs. For the full year 2021, net sales increased by 40.1% to $479.4 million from $342.2 million in 2020, fueled by approximately 18% organic growth and 22% from mergers and acquisitions. Gross profit in the fourth quarter increased to $18.7 million from $16 million a year earlier. The reported gross profit margin decreased by 140 basis points to 16.9%, mainly due to $3.2 million in combined costs from our distribution center relocations in California and acquisition-related expenses incurred during the quarter. On an adjusted basis, excluding these relocation and acquisition expenses, our adjusted gross profit margin rose by 150 basis points to 19.8% from 18.3% in Q4 of 2020. The improvement in our adjusted gross profit margin was primarily driven by a favorable sales mix leaning towards proprietary and preferred branded products, although this was somewhat offset by rising freight and labor costs. These costs notably increased in the quarter, prompting us to implement additional pricing and cost-saving measures in the first quarter of 2022. Selling, general, and administrative expenses grew to $27.7 million in the fourth quarter of 2021, compared to $21.4 million from the previous year. This increase was largely due to higher costs related to distribution center transitions, acquisition and integration expenses, as well as elevated costs linked to supporting our public company status and long-term growth strategy. As noted in our press release, on an adjusted basis, SG&A expenses were $18.5 million or 16.7% of net sales for the quarter, compared to $11.2 million or 12.8% last year. This increase is primarily driven by higher facility costs, marketing expenditures, and personnel expenses. The increased facility costs are a result of the significant growth in the size and scope of our leased distribution centers. The reported net loss attributable to common stockholders was $11 million or $0.25 per diluted share in the fourth quarter, compared to a loss of $10 million or $0.43 per diluted share in the previous year. The weighted average diluted shares outstanding were approximately $44.4 million for Q4 of 2021. Like last quarter, we calculated the pro forma adjusted net income and applied pro forma weighted average diluted shares outstanding as if the IPO had occurred at the start of January 2020, which serves as the earliest comparison. On this basis, the pro forma adjusted net loss for the quarter was roughly $2.3 million or $0.05 per pro forma diluted share, compared to an adjusted net income of $0.5 million or $0.02 per pro forma diluted share from the year-ago period. Lastly, adjusted EBITDA was relatively stable at $4.9 million in the fourth quarter, down slightly from $5 million in the prior year. The adjusted EBITDA margin decreased by 120 basis points to 4.5% from 5.7% in the prior year, largely due to increased SG&A expenses relative to net sales. However, I echo Bill's comments about the significant progress we've made over the full year of 2021, with adjusted EBITDA more than doubling to $47.1 million from $21.1 million last year and adjusted EBITDA margin expanding by 360 basis points to 9.8% in 2021 from 6.2% the year before. Turning to our balance sheet and liquidity situation, as of December 31, 2021, we had over $110 million in total liquidity, comprising $26.6 million in unrestricted cash and roughly $83.6 million available on our undrawn ABL revolving credit facility. We also had about $125.4 million in total debt outstanding. Based on our anticipated growth dynamics for the year, I am pleased to share our 2022 outlook along with some insights into our current assumptions. We project total company net sales growth of 20% to 28%, translating to approximately $575 million to $615 million in net sales for the 12 months ending December 2022. We expect modest organic growth for the year, with significant M&A growth of at least 20%. It's important to note that our organic growth expectations are skewed toward the latter half of the year, starting from a decline in Q1 to positive growth beginning in Q3. In contrast, we anticipate M&A growth to peak in Q1 and Q2, tapering off in Q3 and Q4. We forecast that both M&A and organic growth will enhance our sales mix, resulting in a higher percentage of proprietary brands sold for the full year of 2022. We also expect that the recent pricing actions and related transportation initiatives will assist in mitigating recent and anticipated increases in freight and labor costs. Moreover, we will incur SG&A expenses related to the acquired companies throughout 2022, which will elevate our SG&A costs in dollar amounts. Nonetheless, we anticipate that cost-saving measures and further integration actions planned for 2022, together with higher projected sales volumes, will keep our adjusted SG&A as a percentage of net sales relatively stable compared to the 2021 actual results. Consequently, we expect adjusted EBITDA to range from $63 million to $74 million for the full year 2022, representing about 11% to 12% of net sales. Our net sales and adjusted EBITDA expectations for the full year are based on the assumption that the first quarter of 2022 will likely mirror the EBITDA margin profile seen in the recently concluded quarter as recent pricing actions and cost-saving initiatives become more effective in Q2 2022. We have outlined additional assumptions for 2022 in today’s earnings release, and we encourage you to review them alongside our full-year guidance. In closing, we are proud of the significant progress made over the past year in transforming our business for sustained growth and enhanced profitability. Thanks to the numerous investments made in 2021, we believe we are well-positioned to leverage the considerable growth and margin opportunities within the controlled environment agriculture industry. This concludes our prepared remarks, and we are now ready to take your questions. Operator, please open the lines for questions.

Our first question comes from Andrew Carter with Stifel. Please proceed with your question.

Hi, thanks. I guess my first question is about the certainty of the environment. Could you share the expected magnitude of the organic sales decline for the first quarter? I'm not looking for a return to three quarters, but any information you can provide about the month’s performance, particularly on a week-by-week basis for January and February, would be appreciated.

Andrew, how are you?

Good.

Yes. I think John mentioned the numbers, but the organic growth in Q4 was around the mid-teens, approximately 14% to 15%. We are seeing similar trends year-to-date in 2022. We don’t anticipate any sudden changes in March, although we hope for a better spring, we are not counting on it. Therefore, we expect this trend to continue. This is partly why our organic growth outlook for 2022 reflects that the first half appears similar to the second half of 2021, while the second half is expected to improve as we face easier comparisons and hopefully see more growers return to the industry and our business.

Second question I wanted to ask, just in terms of kind of the margin, because I believe you outlined the margin profile of 14.5% to 15.5% when you were kind of looking at pro forma 2021. And it looks like it's in that range. So your initial guidance is about 300 basis points kind of degradation. You have 400. I mean when do you think we get back to that mid-teens level? Is it pricing catching up? Is it just going to be a function of volume absorption given the estimates, probably like '23 we're getting back there. Just any clarity in getting back to that kind of margin profile that you got to on a pro forma basis last year.

Yes. I'll start and John can certainly build on it. And yes, that's certainly a challenge in the '22 outlook, right? I mean we're taking a lot of costs as many industries and many contemporaries of ours are on freight, on inputs, on labor, on a number of different warehousing, all the things that you know are out there. And so that really has eroded that margin. We have put in place the most aggressive pricing that we've taken on a broad basis, both reflecting through input cost increases. We've also started passing through freight impacts. We've raised our minimums. We changed how we put on for freight surcharges. Most of that is going to start coming into effect in March and April. And so that's new for us and the first time we're pushing that kind of cost return through. I think this will all shake out and normalize late this year but I don't think we're going to see the 13%, 14% kind of numbers until '23. And that's frustrating because that was a good performance by the business, kind of the first half of 2021. And these costs have frankly hit us hard and they hit us at a time when we were integrating, adding people, building SG&A, building capability, doing things you have to do as a public company, all that stuff. So it really hit us at a time then the volume dropped in the back half and it really caused us to have to absorb an awful lot of cost and pass through as many as we could. And we're now getting more fully caught up on that as we're getting through this first quarter of 2022.

Thanks. I'll pass it on.

Thanks, Andrew.

Our next question is from Chris Carey with Wells Fargo. Please proceed with your question.

Hi, everyone.

Hey, Chris.

Hi. So I want to just better understand some of the confidence around back half recovery. I hear you on the comps. It certainly sounds like year-to-date, the markets are still under pressure, specifically on the West Coast. And so as you get into the back half of the year, can you maybe just dimensionalize how big of an impact you're expecting from new states coming online, East Coast or otherwise, to get to the back half acceleration? Also, you mentioned some pretty significant pricing coming in, in March and April. How much are you pricing? I think it was 2.8% or 2.9% in this quarter. And so how is that going to be factoring into the back half? And then just perhaps on the M&A, you noted that the IGE had some pretty good backlog. And so maybe can you just comment on upside from the M&A call and maybe that shielding some of the unknowns on organic sales growth? So thanks for kind of dimensionalizing the sales outlook specifically in the back half.

Yes, I'll begin and then John will provide more information on pricing. We can identify four key building blocks, although we don't have complete visibility on the roles of Virginia, Louisiana, and Missouri to that degree of detail. However, we are experiencing commercial momentum through commitments, backlog, and clients transitioning their business to us. Our DMI proposition, which involves scheduled deliveries planned months in advance, contributes to this momentum, essentially functioning as a form of backlog. We anticipate continued growth in our commercial business, which is still relatively new for us, placing us at a different stage in our development compared to others. Much of our growth this year has been driven by the commercial side rather than retail. Secondly, the peat bogs present an excellent opportunity. Peat serves as a valuable standalone business, as an ingredient in professional mixes, and in other agricultural market segments, including cannabis. We have increased our acreage by 70% this year. Although we won't achieve full farming capacity from these new acres in the first year, we will see some productivity. This increased acreage further supports positive growth forecasts. Regarding the new states, we are confident about ongoing growth. We have already seen over 100% growth in some areas that John mentioned, and we expect this trend to continue as momentum builds. Additionally, our IGE backlog is substantial. We anticipate growth rates of 30% to 50% for IGE in 2022 compared to the entire year of 2021, based on our backlog which includes many orders with 50% deposits. The sales cycles for these orders typically range from three to five months, allowing for clearer visibility into volume than what we've experienced with retail sales in recent years. These four factors provide us with confidence and perhaps even greater optimism than we observe in other industry players at the moment, as we note these developments for Hydrofarm. John, would you like to discuss the pricing dynamics?

Sure. Yes, I'll touch on that. And Chris, just before I do, because I know you asked about it. I mean, as Bill talked about the IGE business that we recently acquired, while we get a good early look from the backlog in that business, the other thing we're seeing is that in a lot of cases, the new business we're winning with IGE tends to be in the eastern half of the U.S. So just another interesting element for us as we look to the back half of next year. On the pricing side, Bill is exactly right. I mean we've taken more frequent pricing actions than we historically have. We've tended to take maybe one action per quarter, historically, over the last several quarters. And generally, when we do that, we're not doing that on every SKU. Of course, we're really only doing on the SKUs where we're seeing the additional pricing action as being necessary. But in our Q1 here, we actually took two separate actions inside of Q1. And we've got another action that we're looking at into Q2. The other thing I would tell you about pricing is historically, when we've taken pricing, we've really kind of focused on the input cost side and really put pricing in place to cover the incremental input costs we saw coming really in an effort to maintain margin. With the recent increase in freight costs and labor costs that we've seen, we're taking a little bit broader view on pricing now. And in addition to product pricing, we're actually looking at some freight initiatives, include freight surcharges and raising freight minimums, all things that we think help in a material way. Historically, for us, over the past several quarters, pricing has been a low single-digit kind of effect, obviously, on a pretty good base but a low single-digit kind of effect. As we look across the full 2022 year, we're looking more towards a mid-single digit to even a little bit better than mid-single-digit pricing for the full year effect. And again, that's an attempt to help mitigate these incremental costs we're seeing.

If I could squeeze in one just because it's related. Do you have any view on your product mix for this year? How important will all consumables for durables be specifically if you're going east and clearly, there will be some durables business there. But obviously, that's recovering a little bit slower in your base markets.

IGE and commercial new markets will be a little more durable oriented probably. I don't know that it will move the total because the total is kind of have a lot of momentum behind on a large scale, the law of large numbers saying. But yes, there will be a little more durables from those two growth drivers for a good bit of the year.

Okay, thank you.

Thanks, Chris.

Our next question comes from Bill Chappell with Truist. Please proceed with your question.

Hey, good afternoon, guys. This is Stephen Lengel on for Bill Chappell.

Hey, Stephen.

How are you guys? Just a quick question on kind of what you guys are seeing in terms of the impact from SMG's recent acquisition of Luxx Lighting on the California lighting business in that region thus far?

Yes. Luxx has had a long history in California as has Gavita and Hawthorne. So they have a deep penetration there. I think that is one of the weaker areas in the industry right now, kind of that West Coast lighting, a lot of that happened in Q4 of 2020 and Q1 of '21. So I think on a year-on-year basis, that area is probably not lapping as well. We don't have as much exposure in that market, meaning we don't have as much business in that market as they do. So it hasn't been a big impact yet for sure. We have a lot of respect for Luxx and a lot of respect for Hawthorne and Scotts. But right now, we're pretty pleased with our portfolio. We have some ideas on how to compete more effectively in lighting and we think that's going to hopefully come through here pretty soon.

Awesome. Thank you very much, guys. I appreciate it.

Sure. Thanks.

Our next question comes from Peter Grom with UBS. Please proceed with your question.

Good afternoon, everyone. Regarding the outlook for organic sales and its modest growth, could you help clarify or specify what you mean by that? It appears to be relatively flat, particularly in light of the comment about M&A growth being at least 20%. Could you provide some more detail on that? I'm really trying to understand what has changed since early January. I recognize that the category hasn't performed well, but it doesn't seem like Q1 is significantly worse than Q4. I would appreciate your insights on what has shifted in the last seven weeks.

Yes, just to clarify on modest, we're thinking about low single-digit growth as being modest. We've started the first quarter in line with our guidance, but the industry is not yet experiencing significant growth. Some of our competitors have also faced challenges with growth. These factors lead us to take a cautious approach. The industry can be dynamic and change quickly, as we've seen in the past year. While we believe there could be a turnaround this year, we're not there yet, which is why we remain quite cautious.

I understand. That brings me to my next question regarding our confidence and outlook as it stands today. It seems like the cautious approach might be rooted in a conservative stance due to recent events. Is that an accurate assessment, or is it more about being realistic and prudent considering the current situation?

Yes, I believe our approach is realistic, prudent, and cautious. It's important to recognize that while we're experiencing a 71% two-year stack, we are also comparing against some significant numbers from the past. As we move beyond the COVID bump from a year and a half ago, we remain conservative because we haven't yet seen a clear turnaround. We aim to provide a forecast that is reasonable and attainable, rather than overstating what we can achieve. With momentum drivers such as commercial expansion and new states, we believe in our strategy, although retail specialty may face challenges, which is concerning since it's a core part of our business. However, Luxx is introducing new initiatives to counter this. Additionally, it’s worth noting that we are observing signs of price increases in key markets, which is a positive development and could encourage renewed interest in the category. We see modest increases in pricing that will benefit everyone. While we are monitoring these changes, we have yet to see the shift needed to become more optimistic about our core organic figures.

Thanks so much. I'll pass it on.

Thanks, Peter.

Our next question comes from Andrea Teixeira with JPMorgan. Please proceed with your question.

Thank you. Good afternoon. I wanted to revisit the price commentary you shared with Peter. Could you also provide an update on the inventory levels you've been observing? Is this something that concerns you at the customer level, potentially leading you to adopt a more conservative approach to organic growth? Additionally, John, you noted an increase in SG&A, largely due to the distribution centers you've expanded—about 70% more capacity. Despite a reduction of 11% in your employee base due to synergies, how do you account for closing the gap of 300 to 400 basis points in your IPO margin if you're not experiencing cost pressures? Could you outline the factors contributing to these cost pressures that you may see in 2023, rather than 2022? Lastly, as a point of clarity, you mentioned that commercial sales have tripled from last year. How much are you projecting for this year?

I can start with the SG&A information and then Bill can add some other points. Year-over-year, SG&A saw a significant increase this quarter, as we mentioned in the press release. We focus on adjusted SG&A to exclude certain factors not included in our adjusted EBITDA calculation. For adjusted SG&A, we're looking at approximately $18.5 million compared to $11.2 million last year. The main factors contributing to this increase include marketing expenses, salaries, and benefits. This year, we owned five businesses in the fourth quarter that we did not own last year, which adds to our SG&A. Additionally, our marketing expenses in Q4 were higher than they were last year, particularly with our presence at the MJBiz conference which we did not attend the previous year. We also had full D&O insurance costs this year that we lacked last year, along with facility costs and increased professional fees as we completed our first year of SOX compliance and incorporated five acquisitions into our first 10-K filing. These elements explain the increase in SG&A. As Bill noted earlier, we made some workforce reductions that will help alleviate some of these cost challenges. However, with the five businesses we now own, I do not anticipate a decrease in SG&A costs. But as our revenue begins to recover, I believe we can regain some of the compression we experienced in Q4 and that we're looking to improve in Q1.

Yes, I'll pick that up. On the couple of things you asked there, Andrea. On inventory, as we talk to our customers, most of the retailers will tell us that they're pretty backed up on lighting. They've got a lot of inventory on lighting. And so that's an area where we're seeing retailers slow down a bit. I think the whole category, as I mentioned, based on the California remarks has slowed down a good bit there and you've seen that in other folks' results as well. But beyond that, I think it's just normalized less demand. I don't think it's really a backup in inventory. On the commercial side, yes, we tripled the volume '20 to '21 and we've got strong double-digit growth, much more than 10%. I think it's a good bit more than 20% in there. It's not doubling or 80% up or anything like that. It's considered in the low 20s kind of percent growth on the commercial side for this year, plus we got growth built into IGE which is closely tied to commercial but we don't look at it quite the same way. So those are the kind of numbers we're expecting in those segments of the business for 2022.

And that commercial would be how much in total for the total company, commercial representing a smaller percentage? But just want to find on that one.

On commercial and IGE, it's going to be in the kind of mid-20s percentage of the company.

Of the totals. Okay. Sorry, I thought we were saying about growth. Okay. Perfect.

Now I just gave you a percentage of sales versus the growth numbers that happen to be very similar numbers but a different number.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back over to Mr. Toler for closing remarks.

Great. Thank you very much, Maria. We appreciate your interest in Hydrofarm this afternoon. And thanks for joining us on the call. Everyone, have a great day. Take care.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.