Given proprietary brands already hit the full-year target, what dynamics drove this growth, especially within the commercial business and MSOs, and what are the future channel opportunities?

Growth is driven by expanding the commercial and MSO business, with 90% of proprietary brand sales currently GrowGen-centric. The company sees tremendous distribution opportunities beyond its own channels, particularly in lawn and garden and agricultural spaces, as private label penetration in hydroponics is just beginning. The brands are performing well, supported by technical advisors. “I would say right now about 90% of the sales going through our proprietary brands right now are GroGen-centric through our commercial division. We have high hopes that, as the years go on, that many other groups adopt our brands within the industry.”

Despite three consecutive quarters of YoY revenue growth, the Q3 guidance implies a YoY decline. Is this a breaking trend, or is there a specific reason for it?

The Q3 FY26 guidance reflects a more even revenue distribution compared to Q3 FY25, which had a significant, lumpy volume of durable sales. While Q3 FY26 may be down YoY, it is still expected to be the strongest revenue quarter for 2026, and the full year is guided for overall growth compared to 2025. Higher margins are also expected in Q3 FY26 due to a higher mix of consumable products. “When you look at Q3 of 2025, What we executed was a significant volume of durable sales in that period that created some level of lumpiness in the period last year.”

Is the current SG&A level a good run rate, or are further cuts expected, given it was relatively flat year-over-year?

SG&A is being rebalanced, with costs shifted from store closures (4 in Q1) to growth initiatives like expanding the commercial sales force, marketing, and product trialing. SG&A is generally expected to remain in the 'low sixes' in the back half of the year, potentially incrementally down, as it's seen as a stable area supporting growth. “So we generally expect SG&A to remain in the low sixes in the back half of the year. So, you know, relatively consistent, maybe incrementally down compared to what you saw in the second quarter.”

GRWG

GrowGeneration (GRWG) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Aug 11, 2026

Source: earnings call transcript

Executive summary

GrowGeneration Q2 FY26 — Strong Profitability Turnaround Driven by Proprietary Brands and Cost Discipline

GrowGeneration continued its strategic transformation in Q2 FY26, achieving its third consecutive quarter of revenue growth and returning to positive adjusted EBITDA. The company's focus on expanding its commercial platform and proprietary brands is driving margin expansion and improved profitability, supported by disciplined cost management. Management is confident in its ability to support increased investment activity from customers regardless of the pending Schedule 3 rescheduling ruling.

Highlights

Achieved third consecutive quarter of year-over-year revenue growth, with Q2 FY26 net sales up 5.5% to $43.2 million.
Proprietary brand penetration reached 39.7% of cultivation and gardening revenue in Q2 FY26, hitting the year-end target of 40% early.
Returned to positive adjusted EBITDA of $0.3 million in Q2 FY26, a $1.6 million year-over-year improvement.
Reduced store and other operating expenses by 21.9% year-over-year to $6.1 million in Q2 FY26.
Maintained a strong balance sheet with $41 million in cash and no debt at quarter-end.

Concerns

Q3 FY26 revenue guidance of $44 million to $46 million implies a year-over-year decline compared to a strong, lumpy Q3 FY25.
The ruling on Schedule 3 rescheduling for adult-use cannabis is still pending, creating policy uncertainty for the industry.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Adjusted EBITDA	$2 million to $3 million high materiality	FY26	High
Full-year 2026 Net Revenue	$162 million to $168 million high materiality	FY26	High
Q3 FY26 Net Revenue	$44 million to $46 million medium materiality	Q3 · FY26	High
Q3 FY26 Adjusted EBITDA	positive medium materiality	Q3 · FY26	High
Proprietary Brand Penetration	40% of cultivation and gardening revenue high materiality	Q4 · FY26	High
SG&A Run Rate	low sixes low materiality	H2 FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Cultivation and Gardening Net sales were $34.9 million for Q2 FY26, compared to $32.9 million in Q2 FY25. Proprietary brand penetration continues to improve revenue quality and gross profit dollars. Proprietary brand sales: 39.7% of segment revenue (Q2 FY26)Proprietary brand sales: 32% of segment revenue (Q2 FY25)	$34.9 million	—	—	—
MMI Storage Solution Net sales were $8.3 million for Q2 FY26, up from $8.1 million in Q2 FY25. This segment benefits from higher capital investment activity and diversification into industrial, agricultural, and specialty end markets.	$8.3 million	—	—	—

Risks & headwinds

Policy uncertainty from Schedule 3 rescheduling

Ruling still pending

Mitigation:Company is well-positioned to support increased investment activity from customers regardless of policy, with its proprietary brands, infrastructure, and customer partnerships.

Seasonality in Q4 performance Q4 FY26

Expected to return to normal levels

Mitigation:Management expects Q4 to return to normal seasonal patterns, implying potential softness compared to Q3.

Year-over-year revenue decline in Q3 FY26 Q3 FY26

Q3 FY26 revenue guidance of $44M-$46M is lower than Q3 FY25

Mitigation:Q3 FY25 had a 'significant volume of durable sales' creating lumpiness; Q3 FY26 revenue is expected to be more consistent and still the strongest quarter of 2026. Higher margins are expected due to a higher consumable product mix.

Rising transportation costs Q2 FY26

Partially offset gross margin improvement

Mitigation:Storage solutions gross profit dollars declined modestly due to project mix and rising transportation costs, despite higher sales volume.

What to watch in Q3 FY26

Schedule 3 Rescheduling Ruling

Next quarter

Current ALJ concluded hearings, ruling pending

Target Decision announced

Why it matters

The outcome will impact the regulatory environment and investment activity in the cannabis industry, affecting GrowGeneration's customer base.

Since our last earnings call, the ALJ concluded its formal hearings. While a ruling is still pending, we are confident that regardless of policy, timing, Rogen is well positioned to support increased investment activity from our customers.

Find out whether GRWG delivers this. Inve re-checks your case every morning.

Q&A highlights

How much of the updated full-year EBITDA guidance, particularly the implied back-half strength, is due to core business performance versus the mentioned tariff benefit, given typical Q4 seasonality?

The updated EBITDA guidance reflects increased confidence from strong Q1/Q2 performance, including positive adjusted EBITDA and improved gross margins. A primary driver for Q3 is the expected recognition of over $2 million in IEPA tariff refunds. Q4 is expected to return to normal seasonal performance.

“WE ARE EXPECTING AN AIPA 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.”

asked by Aaron Grey · answered by Greg Sanders

2 min read 6 chapters

Detailed narrative

Strategic Transformation and Growth Drivers

GrowGeneration's growth strategy centers on three key priorities: expanding its commercial platform, growing proprietary brands, and maintaining a disciplined cost structure. The company's digital B2B platform, GrowGenPro, has strengthened relationships with commercial cultivation customers, including single and multi-state operators and greenhouse growers. This focus on commercial B2B is a core growth driver, with customers adopting GrowGeneration's products and growing protocols.

Proprietary Brand Success and Margin Expansion

Proprietary brands, such as Char-Cour, Drift Hydro, The Harvest Company, and Power SI, are central to the company's margin expansion and long-term value creation. These brands represent higher margins, recurring consumable purchases, and greater competitive differentiation. In Q2 FY26, proprietary brand sales reached 39.7% of cultivation and gardening revenue, already achieving the year-end target of 40%.

Approximately 90% of these sales are currently GrowGen-centric through the commercial division, indicating significant future distribution opportunities in the broader market.

MMI Storage Solutions Performance

The MMI Storage Solution segment delivered solid results, generating $8.3 million in revenue for Q2 FY26, up from $8.1 million in Q2 FY25. This segment benefits from higher capital investment activity and diversification into industrial, agricultural, and specialty end markets.

It continues to provide an increasingly diversified revenue stream outside of traditional cultivation markets, helping to reduce earnings volatility and offering additional opportunities for profitable growth.

Significant Cost Reduction and Profitability Turnaround

GrowGeneration has made substantial progress in reducing its cost structure. Store and other operating expenses declined by 21.9% year-over-year to $6.1 million, and total operating expenses decreased by 13.1% to $14.7 million in Q2 FY26. This disciplined cost management, combined with revenue growth and a higher-margin revenue mix, contributed to the company achieving positive adjusted EBITDA of $0.3 million in Q2 FY26.

This marks a significant turnaround from an adjusted loss of over $16 million in 2024 and over $6 million in 2025.

Schedule 3 Rescheduling and Industry Outlook

The company addressed the ongoing developments around Schedule 3 rescheduling for adult-use cannabis, noting that the ALJ concluded its formal hearings and a ruling is pending. GrowGeneration expressed confidence in its position to support increased investment activity from customers regardless of the policy outcome, citing its growing portfolio of proprietary brands, infrastructure, customer partnerships, and strong balance sheet.

Capital Allocation and Balance Sheet Strength

GrowGeneration ended Q2 FY26 with a strong balance sheet, holding $41 million in cash, cash equivalents, and marketable securities, and no debt. This financial flexibility supports investments in organic growth, evaluation of strategic opportunities, and return of capital to shareholders.

The company repurchased 700,000 shares of common stock at an average price of $1.38 per share during the quarter, with $9 million remaining under its $10 million stock repurchase program.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.