Key Takeaways:
- Hydrofarm’s first-quarter net sales decreased to $54.2 million from $62.2 million the previous year.
- Gross profit margin increased to 20.2% of net sales, with adjusted gross profit margin rising to 23.4%.
- Net loss improved to $12.6 million from $16.8 million.
- Adjusted EBITDA increased to $0.3 million from $(2.1) million.
- The company anticipates further cost savings and improved profitability in 2024.
Financial Performance Overview
Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM), a manufacturer and distributor of hydroponics equipment and supplies for controlled environment agriculture, has announced its financial results for the first quarter ending March 31, 2024.
First Quarter 2024 Highlights vs. Prior Year Period:
- Net Sales: Decreased to $54.2 million from $62.2 million.
- Gross Profit Margin: Increased to 20.2% from 18.3%.
- Adjusted Gross Profit Margin: Increased to 23.4% from 22.6%.
- Net Loss: Improved to $12.6 million from $16.8 million.
- Adjusted EBITDA: Increased to $0.3 million from $(2.1) million.
- Free Cash Flow: Improved by $6.9 million.
Bill Toler, Chairman and CEO of Hydrofarm, stated, “We are pleased with our first quarter results, as we delivered adjusted gross profit margin expansion for the fifth consecutive quarter driven by elevated operational productivity. Our restructuring actions and related cost-saving initiatives have been effective, leading to improved profitability.”
Detailed Financial Results
Net Sales: The decrease to $54.2 million was primarily due to a 13% decline in product volume/mix, mainly attributed to an oversupply in the cannabis industry.
Gross Profit and Margin: Despite a decrease in gross profit to $10.9 million from $11.4 million, the gross profit margin improved to 20.2%. Adjusted gross profit decreased to $12.7 million from $14.1 million, with the margin increasing to 23.4%, reflecting better productivity from restructuring efforts.
SG&A Expenses: SG&A expenses decreased to $19.6 million from $24.4 million, with adjusted SG&A expenses falling to $12.3 million from $16.2 million. The reduction was driven by lower facilities costs, professional fees, insurance costs, and headcount reductions.
Net Loss: Improved to $12.6 million, or $(0.28) per diluted share, from $16.8 million, or $(0.37) per diluted share, due to lower SG&A expenses.
Adjusted EBITDA: Increased to $0.3 million from $(2.1) million, supported by lower adjusted SG&A expenses and higher adjusted gross profit margin.
Cash Flow and Balance Sheet: As of March 31, 2024, Hydrofarm had $24.2 million in cash and $25 million of available borrowing capacity on its revolving credit facility. The company had a principal balance of $120.5 million on its term loan, $9.4 million in finance leases, and $0.1 million in other debt. Net cash used in operating activities was $2.3 million, with $1.4 million invested in capital expenditures, resulting in free cash flow of $(3.7) million.
Strategic Actions and Outlook
On May 10, 2024, Hydrofarm entered into an agreement to sell assets related to the production of certain durable equipment products for approximately $8.7 million. This sale is part of the company’s strategy to improve profitability by reducing fixed costs associated with its proprietary branded Innovative Growers Equipment, Inc. (IGE) products. Toler commented, “Our restructuring plan has been effective so far, and we expect further cost savings in 2024. We are also encouraged by potential demand tailwinds, including recent U.S. regulatory developments surrounding the rescheduling of cannabis.”
2024 Outlook:
- Net Sales: Expected to decrease in the low to high teens percentage range.
- Adjusted EBITDA: Anticipated to be positive.
- Free Cash Flow: Expected to be positive.
Hydrofarm reaffirms its focus on cost savings from restructuring actions and productivity initiatives, with reduced SG&A expenses and improved adjusted gross profit margin. The company plans to invest $4.0 to $5.0 million in capital expenditures for the year.
Read the complete financial result here.
Hydrofarm Holdings Group Latest News
Hydrofarm Holdings Reports Q4 & FY 2023 (2024/03/01)
Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM) reported a decrease in net sales for the fourth quarter and fiscal year ended December 31, 2023. Despite the decline in sales, there was an increase in gross profit margins and a reduction in net losses. The company’s strategic adjustments and cost-saving efforts enabled it to deliver positive Adjusted EBITDA and Free Cash Flow in 2023. Looking ahead to 2024, Hydrofarm anticipates a decrease in net sales but remains optimistic about achieving positive adjusted EBITDA and free cash flow.
Hydrofarm Holdings Group Q3 2023 Results (2023/11/10)
Hydrofarm Holdings Group’s Q3 results showed a decrease in net sales and gross profit, but an improvement in adjusted gross profit and EBITDA. They began their second phase of restructuring to generate cost savings. The decrease in gross profit was due to restructuring and inventory charges. However, adjusted gross profit increased due to improved productivity and lower freight costs. They have a strong liquidity position and generated positive free cash flow, contributing to increased cash balance from the previous quarter. Hydrofarm reaffirmed its full-year outlook and expects modestly positive adjusted EBITDA with positive free cash flow for the entire year.
Read the complete results here.
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Hydrofarm Holdings Group, Inc. has released its financial results for Q2 2023. Net sales declined to $63.1 million from $97.5 million, but the company witnessed a surge in gross profit and adjusted gross profit. The net loss of $12.9 million improved from the prior year, and adjusted EBITDA turned positive. The company generated cash from operating activities amounting to $9.9 million and Free Cash Flow of $8.3 million. The outlook for 2023 looks positive, with net sales expected to be between $230 million to $240 million, and positive Free Cash Flow anticipated for the entire year.
Hydrofarm Holdings Group Inks Partnership With CEA Advisors (2023/06/09)
Hydrofarm Holdings Group announced a strategic alliance with CEA Advisors to drive growth in the controlled environment agriculture (CEA) sector. Innovative Growers Equipment (IGE) will manufacture and market Growtainers® and Growracks® in North America. The partnership will enhance Hydrofarm’s capacity to offer innovative solutions and support to the CEA market. Their first joint initiative will focus on designing an affordable entry-level Growtainer® for beginners in CEA farming.
HydroFarm Meets Earnings Expectations & Exceeds Sales in 2022 (2023/04/10)
Hydrofarm Holdings Group, Inc reported its Q4 and full-year financial results for December 31, 2022. The company’s net sales decreased to $61.5 million due to a decline in product volume from the industry recession. Gross losses were reported, and the company initiated a restructuring to right-size the company and enable cost savings in future periods. Despite exceeding market expectations regarding sales, Hydrofarm’s stock price significantly decreased by over 90% throughout 2022.
Hydrofarm Q3 Results: Major Drop in Net Sales (2022/11/10)
Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM), announced their Q3 2022 financial results. The net sales reached USD 74.2M, gross profit reached USD 5.9M, and they incurred a net loss of USD 23.5M or USD (0.52) per diluted share. They generated net cash from operating activities of USD 8.2 million and positive Free Cash Flow of USD 5.6 million. They reaffirmed full-year 2022 outlook with net sales of approximately USD USD 330 million to USD 347 million and Adjusted EBITDA(1)(3) of approximately USD (25) million to USD (16) million.
HydroFarm and Ag Gas Ink Exclusive Distribution (2022/08/24)
Hydrofarm Holdings Group, Inc. has signed an exclusive deal with The Agricultural Gas Company to offer its CO2 generation, delivery, and control system to customers throughout North America. The system has been proven to boost crop yields and quality by enriching the plant canopy with carbon dioxide. AG Gas’ solution is fully compliant with safety standards and has shown yield improvements ranging from 20% to over 50% on cannabis crops grown in various settings.
Hydrofarm Holdings Announces Q2 2022 Results (2022/08/10)
Hydrofarm Holdings Group, Inc. announced financial results for its second quarter ended June 30, 2022. Net sales decreased to $97.5 million compared to $133.8 million. Gross Profit decreased to $7.3 million compared to $29.6 million. Net loss was $(203.3) million, or $(4.53) per diluted share, compared to net income of $2.3 million, or $0.05 per diluted share. Full Year 2022 Outlook: Net sales of approximately $330 million to $347 million. Adjusted EBITDA(1)(2) of $(25) million to $(16) million.
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