Hydrofarm Holdings Group, Inc. (HYFM), a leading manufacturer and distributor of hydroponics equipment and supplies, has released its first-quarter results, showing a decrease in net sales and gross profit compared to the previous year’s first quarter.
Net sales fell to $62.2 million, a substantial drop from the $111.4 million reported in the first quarter of 2022. In addition, gross profit decreased, dropping to $11.4 million from $16.6 million. However, the company’s adjusted gross profit was reported at $14.1 million, compared to $22.3 million in the prior year. Despite these declines, Hydrofarm improved its gross profit margin to 18.3% of net sales, up from 14.9%, with the adjusted gross profit margin rising to 22.6% from 20.0%.
According to the company’s report, they experienced a net loss of $16.8 million, or $0.37 per diluted share, better than the net loss of $23.3 million, or $0.52 per diluted share in Q1 2022. However, the Adjusted EBITDA decreased to $2.1 million, lower than the $3.1 million loss in the same period last year.
Cash used in operating activities was reported at $9.0 million, with a negative free cash flow of $10.6 million, which marks a $2.0 million improvement compared to the first quarter of 2022.
Despite the challenging first quarter, Hydrofarm has reaffirmed its full-year 2023 outlook, expecting net sales to be between $290 million to $310 million, albeit towards the lower end of the range. The company also anticipates modestly positive adjusted EBITDA and positive free cash flow.
Bill Toler, Chairman, and Chief Executive Officer of Hydrofarm, commented on the results, expressing pride in the team’s efforts amidst restructuring initiatives and industry-wide supply and demand imbalances. He highlighted the completion of the consolidation of Hydrofarm’s Canadian nutrient manufacturing facility, the closure of their regional office in China, and the relocation of their distribution center in Western Canada as significant steps in reducing overall costs.
Toler stated, “We have made strides by reducing our overall costs to position ourselves to drive profitability in the near term by improving brand sales mix, increasing productivity, and reducing SG&A.” He remains optimistic about Hydrofarm’s long-term business fundamentals and ability to capitalize on growth opportunities in the future.
Image provided by Hydrofarm (HYFM)
