Hydrofarm Holdings Group Reports Q2 2023 Financial Results

LOS ANGELES— Hydrofarm Holdings Group, Inc.  an independent manufacturer and distributor of hydroponics equipment and supplies for controlled environment agriculture, unveiled its financial results for the second quarter

Key Takeaways from Q2 2023:

• Net Sales: A decline was observed in net sales, which stood at $63.1 million, down from $97.5 million in the prior year period.
• Gross Profit: The company reported an increase in gross profit to $14.5 million, up from $7.3 million. This translates to a gross profit margin of 23.0% of net sales, a significant rise from the previous year’s 7.5%.
• Adjusted Gross Profit: Hydrofarm’s adjusted gross profit saw an uptick, reaching $17.0 million from $9.1 million, with the adjusted gross profit margin at 27.0% of net sales, compared to 9.3% in the prior year.
• Net Loss: The company reported a net loss of $12.9 million, a marked improvement from the net loss of $203.3 million in the previous year.
• Adjusted EBITDA: The company posted a positive adjusted EBITDA of $2.5 million, a turnaround from the negative $6.8 million in the prior year period.
• Cash Flow: Hydrofarm generated $9.9 million from operating activities and reported a free cash flow of $8.3 million.

Looking Ahead to 2023:

Hydrofarm provided an updated outlook for the full year 2023, projecting net sales in the range of $230 million to $240 million. The company anticipates a modestly positive adjusted EBITDA and a positive free cash flow.

In a statement, the company highlighted its achievement of positive adjusted EBITDA for the first time since Q1 of 2022. This was attributed to robust gross margin expansion and significant cost-cutting measures. The company’s adjusted SG&A reached its lowest quarterly total since Q2 of 2021, prior to its five acquisitions.

The company emphasized its successful execution of a restructuring plan and cost-saving initiatives, which have bolstered its margin performance. This positions Hydrofarm more securely to navigate the observed volume softness in the industry.

Furthermore, Hydrofarm’s aggressive working capital management strategy continued to bear fruit. The company reduced its inventory levels, resulting in a positive free cash flow exceeding $8 million for the quarter.

The company expressed satisfaction with its progress, reiterating confidence in the long-term fundamentals of its business amidst the evolving landscape of controlled environment agriculture.