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Mar 31, 2023
Hydrofarm Q1 2023 Earnings Report
Hydrofarm's financial performance declined due to industry oversupply, but restructuring efforts led to improved gross profit margin and reduced SG&A expenses.
Key Takeaways
Hydrofarm Holdings Group reported a decrease in net sales to $62.2 million, driven by a decline in volume and price/mix of products sold. Despite the sales decrease, the gross profit margin increased to 18.3%, and the company's net loss improved to $(16.8) million. The company reaffirms its full year 2023 outlook, expecting net sales between $290 million and $310 million and positive Free Cash Flow.
Net sales decreased to $62.2 million compared to $111.4 million year-over-year.
Gross profit decreased to $11.4 million, but gross profit margin increased to 18.3%.
Net loss improved to $(16.8) million, or $(0.37) per diluted share, compared to $(23.3) million, or $(0.52) per diluted share, in the prior year period.
Adjusted EBITDA decreased to $(2.1) million compared to $3.1 million in the prior year period.
Hydrofarm
Hydrofarm
Forward Guidance
The Company is reaffirming its full year 2023 outlook, expecting net sales between $290 million and $310 million and positive Free Cash Flow.
Positive Outlook
- Net sales of approximately $290 million to $310 million.
- Adjusted EBITDA that is modestly positive for the full year.
- Free Cash Flow that is positive for the full year.
- Improved year-over-year Adjusted Gross Profit and Adjusted Gross Profit margin.
- Capital expenditures of approximately $7 million to $9 million.
Challenges Ahead
- The Company now expects results to be toward the low end of the net sales range.
- The market in which we operate has been substantially adversely impacted by industry conditions, including oversupply and decreasing prices of the products the Company's end customers sell.
- If industry conditions worsen or are sustained for a lengthy period, we could be forced to take additional impairment charges and/or inventory and accounts receivable reserves, which could be substantial, and, ultimately, we may face liquidity challenges.
- The ongoing COVID-19 pandemic could have a material adverse effect on the Company’s business, results of operation, financial condition and/or cash flows.
- Interruptions in the Company's supply chain, whether due to COVID-19 or otherwise could adversely impact expected sales growth and operations.