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Mar 31, 2024
Hydrofarm Q1 2024 Earnings Report
Hydrofarm's first quarter results showed improved operating metrics driven by cost savings.
Key Takeaways
Hydrofarm Holdings Group reported a decrease in net sales to $54.2 million compared to $62.2 million in the prior year period. However, the company saw improvements in gross profit margin, net loss, and adjusted EBITDA. The company is reiterating its 2024 guidance of positive Adjusted EBITDA and positive Free Cash Flow.
Net sales decreased to $54.2 million compared to $62.2 million.
Gross Profit Margin increased to 20.2% compared to 18.3%.
Adjusted EBITDA increased to $0.3 million compared to $(2.1) million.
Net loss improved to $12.6 million compared to $16.8 million.
Hydrofarm
Hydrofarm
Forward Guidance
The Company is reaffirming its full year 2024 outlook with net sales to decrease low to high teens in percentage terms and positive Adjusted EBITDA and Free Cash Flow.
Positive Outlook
- Improved year-over-year Adjusted Gross Profit Margin resulting primarily from cost savings associated with restructuring actions and related productivity initiatives and an expectation of minimal non-restructuring inventory reserves or related charges.
- Reduced year-over-year Adjusted SG&A expense resulting primarily from full year benefit of headcount reductions completed in 2023 and reductions in professional fees, facilities and insurance expenses.
- Reduction in inventory and net working capital helping to generate positive Free Cash Flow for the full year.
- Capital expenditures of approximately $4.0 million to $5.0 million.
- Company expects improved profitability on future IGE branded product sales due to an anticipated decrease in fixed costs.
Challenges Ahead
- Net sales to decrease low to high teens in percentage terms.
- The Company estimates it will record a loss on the disposition of the tangible and intangible assets of approximately $12 million in the second quarter of 2024, upon closing of the Asset Sale.
- 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, which, in turn, have materially adversely impacted the Company's sales and other results of operations and which may continue to do so in the future.
- 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.
- Hydrofarm's current stock prices are at depressed levels and any equity financing would be dilutive.