Thank you, Claudia, and good afternoon. With me on today's call 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 first quarter 2022 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 discussions 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 our current expectations. We refer all of you to our recent SEC filings for more detailed discussion of the risks that can 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 would like to turn the call over to Bill Toler. Bill?

Thank you, Fitzhugh, and good afternoon, everyone. Since our IPO in December of 2020, we've worked hard to strengthen our business and lay a foundation for long-term success. We've completed five acquisitions that have reshaped our product portfolio with a focus on higher-margin consumables, increasing both our proprietary and preferred brands. We have also expanded our distribution and manufacturing footprint by over 70% and completed three financings to further solidify our balance sheet. We have added new skills to our management team here at Hydrofarm as well. With a long history of consistent growth, combined with the strong tailwinds of the CEA hydroponic growth, we believe our optimism is grounded. However, while optimistic about the future of our business and our long-term potential, recent volume trends across the industry have been impacted by the external environment due to the agriculture oversupply that has hampered cannabis growing activity across the U.S. and Canada. Our sales in Q1 are essentially flat compared to last year's first quarter, supported largely by our M&A volume. With that in mind, we believe it's prudent to adjust our outlook for 2022, which John will discuss in further detail in a moment. Nevertheless, besides these transient challenges, we should not lose sight of the fact that end consumption of cannabis continues to grow. The best proxy we have for this is dispensary unit volume data measured by Headset, which is showing increasing volume, both sequentially and year over year. This end-use consumption is leveling out cannabis inventories which should help the hydroponic industry return to a more normalized growth. During this challenging time, we are working to control the controllables by taking additional actions to control cost, increase prices, and protect our business. These include price increases, passing on fuel surcharges, and passing on higher freight costs. We have also reduced our employee base by about 11% by the end of the first quarter and continue to optimize our organization as we capture cost synergies from the acquisitions completed in 2021. The results of these actions are helping to mitigate inflationary costs and beginning to positively impact our P&L. We are using the short-term volume challenges as a time to make us a better operator and a stronger, leaner company, so when growth returns, we will be more profitable and a stronger business. In addition to these actions, the growth drivers we laid out in prior communications are actually performing relatively well. When you look at IGE and our commercial business, they both enjoyed a solid first quarter. Several of the newer legalized states are doing pretty well and also our peat business we're seeing solid performance. However, this has been offset by softness in our core retail business, including legacy markets like California, Michigan, and Oklahoma. Lastly, we continue to believe that adult-use legislation will provide us with significant growth opportunities in the future. While the new states have been slow to implement, we continue to see an opportunity for growth in cultivation activity in late 2022. Ultimately, we expect an acceleration in the cannabis market growth resulting from these state legislative changes and increasing popular support. In summary, the actions we've taken, combined with our growth drivers, have not only helped us refine and optimize our organization, but also equipped us to move past the near-term challenges. Moreover, with a strong product portfolio and a healthy balance sheet, we believe we're well positioned to capture the tremendous growth opportunities that lie ahead. With that, I'll turn it over to John to further discuss the details of our first quarter financials and provide comments on our updated full year 2022 outlook. John?

Thanks, Bill, and good afternoon, everyone. Net sales for the first quarter held steady at $111.4 million compared to the prior year period. Our 2021 acquisitions added 34.6% to our top line in the first quarter of 2022 relative to the prior year period. But this M&A growth was offset by a 34.6% decline in organic sales due to softness we experienced in several U.S. states and in Canada. In the U.S., California remained challenged, but we also experienced softness during the quarter in several of the historically larger state markets. Though not yet sizable enough to offset these historically larger states, we experienced year-over-year organic growth in Q1 in several other states and regions. For example, in the southeastern U.S., states such as Mississippi, Louisiana, and Florida, each experienced double-digit or more year-over-year organic growth in Q1. Similarly, several other states, most notably Virginia and New Jersey, experienced significant growth in the quarter. In Q1, we also realized a 2.2% price/mix benefit, which is consistent with our intention to pass through higher costs and consistent with our own internal expectations for the quarter. Gross profit during the fourth quarter decreased to $16.6 million as compared to $23.2 million in the year-ago period. During the first quarter, we incurred $3.9 million in acquisition-related expenses. We also experienced a significant year-over-year increase in depreciation and amortization expense, largely due to purchase accounting and the stepped-up asset values that resulted from our 2021 acquisitions. For comparability purposes, we included in the press release the calculation of adjusted gross profit, which excludes these items. On this basis, adjusted gross profit was $22.3 million, or 20% of net sales in the first quarter, down slightly from $23.4 million or 21% of net sales last year. Adjusted gross profit was negatively impacted by a $3.2 million increase in inventory reserves, primarily consisting of a write-down of certain lighting products during the quarter. Excluding the increase in inventory reserve, adjusted gross profit margin would have been higher in the first quarter of 2022 than in the prior year period. I should also note that while freight and labor costs were higher in the quarter on a year-over-year basis, our pricing actions, freight initiatives, and favorable sales mix largely offset these items. Selling, general, and administrative expenses increased to $43 million in the first quarter of 2022 compared to $16.8 million in the year-ago period. The increase in SG&A was primarily due to a $13.5 million increase in amortization expense, again, due to stepped-up asset values from the acquisitions, distribution center relocation costs, acquisition and integration-related costs, and certain other non-cash expenses detailed in the back of today's earnings release. Adjusted SG&A expense, which adjusts for these items, was $19.2 million, or 17.2% of net sales in the quarter, versus $13.5 million, or 12.1% last year, primarily driven by an increase in compensation costs, facility costs, and insurance expenses. As a reminder, these added costs primarily emanate from the five acquisitions we did last year and the overall increase in the size and scope of our operations today, all of which help prepare us for future growth. Reported net loss was $23.3 million, or $0.52 per diluted share in the first quarter compared to income of $4.9 million, or $0.13 per diluted share last year. Adjusted net loss for the quarter was approximately $7.8 million, or $0.17 per diluted share, compared to an adjusted net income of $7.2 million, or $0.18 per diluted share in the year-ago period. Lastly, adjusted EBITDA decreased to $3.1 million in the first quarter from $9.9 million in the prior year period. Adjusted EBITDA margin decreased to 2.8% from 8.9% in the prior year period, driven primarily by higher SG&A expenses relative to net sales in the period comparisons as well as the $3.2 million inventory reserve I mentioned earlier. It is worth noting that if not for the inventory write-down, our Q1 adjusted EBITDA would have been in line with our commentary back in March, even on lower-than-expected net sales. This suggests that the initiatives we put in place in Q1 are indeed having a positive impact on the P&L in spite of the continued revenue softness. Moving on to our balance sheet and overall liquidity position. As of March 31, 2022, we had over $111 million in total liquidity between $12.2 million unrestricted cash and approximately $100 million available on our undrawn ABL revolving credit facility. We also maintained approximately $125 million in debt outstanding under our term loan. Based on our Q1 results and recent sales trends, we are updating our full-year 2022 outlook and providing you with some color around our current assumptions. We now expect total company net sales growth of 0% to 8%, which translates to approximately $480 million to $520 million in net sales. We expect a decline in full-year organic sales offset by M&A growth. While we expect total sales growth to resume in Q3 versus reported results a year ago, we now expect quarterly organic growth to resume in Q4. Though difficult to make this call only four full months into our 2022 fiscal year, based on the soft early spring sales, we felt updating our guidance was the prudent thing to do. Our pricing and cost-saving actions are yielding positive early results and are helping to counterbalance the margin impact of a softer-than-expected top line. While we expect this relationship to continue, our adjusted EBITDA estimates imply a margin profile that is somewhat impacted by the reduction in full-year net sales. Lastly, and as Bill pointed out earlier, we've made many investments over the past year to prepare us for the CEA growth expected in our future. We expanded our distribution footprint, invested in inventory positions, increased the size and scope of our proprietary brand offering and manufacturing capabilities, and added key leadership roles. Against this backdrop, we feel justified in reducing our capital expenditure plans slightly to $8 million to $10 million and inserting controls to reduce over time our net working capital investments and further boost internally generated cash flow. In closing, we believe we've put in place the necessary steps to weather the current industry headwinds. While it's prudent to lower our expectations for the full year, we remain optimistic about our business fundamentals and our ability to capitalize on the growth opportunities in the CEA industry. This concludes our prepared remarks, and we're now happy to answer any questions you might have. Operator, please open the lines for questions.

The first question comes from Andrew Carter from Stifel.

First question I wanted to ask, you've taken the inventory impairment of about $3 million. First part of that is, as you review the categories, how much more could there be, i.e., how much of the inventory right now is in deflation? I would assume lighting is. And then a separate part of that question is, I think your purchases, I did my math here quickly, were still up. Do you think you'll be able to generate free cash flow this year working through inventory?

Yes. For sure, our inventory levels remained pretty strong. The $3.2 million inventory reserve primarily relates to select lighting SKUs, particularly in the high-pressure sodium area. I would note we did not write those down to 0, but rather to a level we think allows us to move those products efficiently. We'll continue to keep a watchful eye. But at this point, we think what we did is what's warranted. And with respect to your question on free cash flow, yes, I think with our CapEx assumptions, working capital assumptions, and assuming we continue to progress towards the guidance we just outlined, we do expect to generate free cash flow this year.

And then the second question is, you mentioned the pricing and it was 2%. It's hard to kind of read on mix. Are you getting incremental pricing through? And I'm not sure in this environment, when volume is down 30%, you can tell or not. Do you get any pushback or see any risk, in particular, I'm asking about the promotional environment that you're seeing out there?

Yes. The pricing is primarily on a list price basis. Promotional activity hasn't materially changed across the categories, as you suggested, with volumes down and retail traffic down, the effectiveness of promotions has been as bad as it would be if you were getting more people in the stores and more people buying. So you haven't really seen a whole lot more investment on that side of it. I think individual distributors and brand owners may have certain categories they're promoting. John mentioned earlier that we're working to move through the HPS double-ended lighting that we're working against under our Phantom brand. But we haven't seen it go over the top on promotion. The pricing isn't primarily on list pricing. We've also put in place fuel surcharges and increased freight requirements for our customers to buy, again, helping solidify the cost that we're seeing.

The next question comes from Peter Grom from UBS.

So just a couple of questions. Maybe first, and I don't mean to be indiscernible here, but I guess I'm just trying to understand what happened this quarter. You reported in early March in the commentary that sales are going to be down, a little bit worse than Q1 on an organic basis, and essentially more than doubled that decline. And I totally understand the category has been challenged, but you more than doubled the decline that you were expecting even though you had two months in the rear-view here. So I'm just trying to understand the visibility you have in your business when we think about your guidance, particularly as we look out to the balance of the year.

Yes, it's fair to say that visibility in the category has been challenging for everyone. We are among those struggling to identify where the demand is and when it will materialize. We had some expectations that as we approached the spring months, particularly March, which represents 40% of the first quarter, there would be a turnaround to positive growth. Unfortunately, it went in the opposite direction, and March turned out to be weaker than anticipated. So yes, it was a disappointing outlook. When we provided guidance in March, we did not specify a number but indicated it would be worse than Q4, and it ended up being significantly worse than we are reporting now. The lack of visibility is certainly a challenge. We are all trying to improve our understanding of the situation, but there isn't much available data that can assist us. We are working hard to plan and assess what business we can expect to achieve the best possible results. I completely understand your question, Peter.

No. Okay. That's helpful. And then you mentioned recent sales trends as part of the reason for the lower guidance as much as you did. So maybe you could just speak to what you're seeing through April and May and how we should think about sales on an organic basis in Q2? And then maybe just layering on that, I guess, as you look at some of your peers, right, I totally understand the visibility has been a challenge for everybody. But the level of negative revision from a revenue perspective is far greater at this point. And so are you simply being conservative? Or are you prudent? Do you feel like this is what you should and we should expect to achieve? Just trying to understand the underlying assumptions here and your comfort in hitting this revised target.

We haven't seen much improvement in April, and it's too early to tell about May. April did not show significant changes, which has impacted our outlook for the year as we haven't experienced the spring return we had anticipated. Our largest competitor hasn't provided a revised forecast, and GrowGen just reported a notable reduction, with their same-store sales decline aligning with our organic numbers in Q1. We are monitoring these trends closely but have not seen any positive shifts, which is why we've adjusted our projections downward. We aim to provide the most accurate numbers based on what we believe we can realistically achieve, without exaggerating or underestimating our forecasts.

Okay. If we were to maintain the current rate for the rest of the year, would that lead to the revenue and EBITDA projections you've mentioned? Or do you believe that? I'm trying to understand because last quarter you indicated in March that you were hoping for something.

The category, I'm sorry, go ahead, Peter.

No, that's it. I just want to make sure that's what I was trying to understand, is it assuming that the current state of the category holds and that just as the comparisons get easier in the back half of the year that that's when you would get to organic growth? Or does it embed that the category shows some signs of life here in the coming months?

Yes. We are expecting it to show some strength in Q4 versus perhaps earlier we had thought maybe late Q2 or early Q3. There is seasonality in the business, as you well know. The last six months have been the roughest from a seasonality standpoint. Q2 and Q3 should be the stronger ones. We'll see how that plays through as we go through the year. And yes, the easier comps in the back half will give us more confidence that we should be able to track with better outcomes.

The next question comes from Andrea Teixeira from JPMorgan.

If we consider what's included in your guidance regarding pricing, including the pricing adjustments you've already implemented, you've highlighted some impacts such as fuel surcharges and minimum freight costs. I'm also curious about how the mix of products, including lighting, affects these variables. Additionally, given the current state of the industry and your recent comments about maintaining cash flow, are you finding it necessary to be more selective with your customers? Are there potential issues with accounts receivable due to longer-than-expected demand recovery? Lastly, I would like to understand how you perceive pricing and market rationality, especially since others in the industry are experiencing similar challenges.

Yes, Andrea, you raised several important questions. Let's start with the pricing issue. We experienced a 2.2% benefit from pricing and mix in the quarter. It's worth mentioning again that we implemented several pricing actions in the first quarter, but we didn't capture the full effect during that period. Additionally, towards the end of the first quarter, we introduced new freight initiatives, including freight surcharges and adjustments to minimum freight charges, which are advantageous for our pricing strategy and overall net price realization. We anticipate taking further pricing actions in the second quarter. As we plan for the year ahead, we expect our price realization to improve as we begin to see the full-year effects of the pricing measures implemented in both the first and second quarters. Another factor impacting our price realization will be the acquisitions we made in 2021, which will start to integrate into our organic sales after their 13th month. We have also implemented pricing changes for some of the acquired companies, but currently, those effects aren't reflected in our net price realization since they fall under the M&A growth category. This will positively influence our pricing growth. From a cash flow standpoint,

Oh, sorry.

Go ahead.

I was just trying to round up your commentary on the pricing. So when you think about all-in, from the 2%, would you get into like a mid-single or is that aspirational?

Yes. We still believe that by the end of the year, we will be in the mid-single digits.

By, call it, end of the second quarter, I'm assuming?

I don't think we've confirmed that by the end of the second quarter. If you're referring to the first six months of the year, I'm not sure that would be the case, as there's expected to be more focus on the latter half of the year as these pricing initiatives start to take effect and build upon one another. Additionally, many of the acquisitions we made occurred in the last seven to eight months of last year, bringing in the benefits of pricing actions from those companies as they integrate into our organic growth. Therefore, it is anticipated to lean more towards the latter half of the year.

Okay. And then on the cash flow side and accounts receivable, anything we should be aware of?

We haven't really seen a lot of pressure there yet. Look, we obviously have our antenna up and remain cautious, but so far, so good on that front really.

Okay. I'll pass it on.

The next question comes from Bill Chappell from Truist Securities.

I'm trying to understand the composition of the situation. Is it more focused on durables and lighting, or is it a broader industry issue? The reason I'm asking is that it seems there is a problem with an oversupply of cannabis. With your competitors expanding and your own growth over the past six to nine months, it looks like there’s an excess of lighting and hard goods. I want to know if this oversupply is affecting your outlook and leading to pricing pressures, as clearing this inventory can take some time. Is this a larger concern, or is it more related to the agricultural side of cannabis?

Yes. It's clearly still more on the cannabis agricultural side, but durables are down a few hundred basis points more than consumables for us. I can't speak to anybody else. But I know for us, if you break it apart, durables are down more. This one is primarily targeted around the high-pressure sodium double-ended lights, the Phantom lights, which have been the historical way we go to market and the way the industry has gone to market. That's now shifting very quickly to LEDs. We compete effectively in LEDs, but the high-pressure sodium segment is dropping faster than LEDs are picking up, at least for us. We have some pressure on inventory there. That's why we took the write-down that we did in Q1 to get that down to a promotional level that we think will move the products through. But overall, I still think the umbrella here is the agricultural supply. You see that in other retailers' numbers, and you see that in a lot of different places that retail traffic is down, overall, it's down. But we all can't forget that if you use Headset dispensary data, then people are still buying more cannabis through the dispensaries than they were last quarter, than they were a year ago, which suggests that consumption is still growing, and eventually, that's going to balance out inventory and get demand and inventory growing back in balance, and you'll see growth return to the category.

Okay. Regarding the new states, you mentioned some positive developments in New Jersey and Virginia. Are those still progressing as expected, potentially becoming more significant in the latter half of this year and into next year? Do you anticipate any advancements or setbacks from those states that could impact the industry?

Yes. All of them have been slower than we had hoped. Many of these measures were approved in the '16 and '18 elections, and some are not even implemented yet. For instance, New York is still finding its footing, New Jersey just launched last week, and Virginia has moved from '24 to '23. Overall, many of them have taken longer than we anticipated. In the MSO and commercial sectors, no one is canceling, but we are experiencing delays. Many in the durable goods sector are facing delayed orders or pushing projects back as they wait for the industry to stabilize. This has cast a shadow over the current environment. Got it. Thanks for the color.

At this time, there are no further questions. I'd like to turn the call back to Mr. Bill Toler for closing comments. Thank you, sir.

Thank you, folks. We appreciate your interest and support of Hydrofarm and look forward to updating you about the business down the road. Thank you so much.

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