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Mar 31
Hydrofarm Q1 2025 Earnings Report
Hydrofarm Holdings Group announced its first quarter 2025 financial results, highlighting a decrease in net sales and an increase in net loss compared to the prior year period.
Key Takeaways
Hydrofarm Holdings Group reported a challenging first quarter in 2025 with net sales decreasing to $40.5 million from $54.2 million in the prior year. The company experienced an increased net loss of $14.4 million, compared to $12.6 million in the same period last year. Despite these declines, the company achieved sequential improvements by focusing on higher-margin proprietary brands and implementing cost-saving initiatives.
Net sales decreased by 25.2% to $40.5 million in Q1 2025, primarily due to a 22.6% decline in volume/mix of products sold and a 1.8% decrease in price, largely attributed to an oversupply in the cannabis industry.
Gross Profit decreased to $6.9 million (17.0% of net sales) and Adjusted Gross Profit decreased to $8.5 million (21.0% of net sales), primarily due to lower net sales and a decline in proprietary brand sales mix.
SG&A expense decreased by 9.0% to $17.9 million, and Adjusted SG&A expense decreased by 11.0% to $11.0 million, mainly due to reduced compensation costs from lower headcount and facility costs.
Net loss increased to $14.4 million, or $(3.12) per diluted share, compared to a net loss of $12.6 million, or $(2.75) per diluted share, in the prior year period, driven by lower sales and gross profit margin, partially offset by SG&A expense reductions.
Hydrofarm
Hydrofarm
Forward Guidance
Due to macroeconomic uncertainty and prolonged cannabis industry headwinds, Hydrofarm Holdings Group has withdrawn its full year 2025 outlook for net sales, Adjusted EBITDA, and Free Cash Flow. However, the company remains committed to its strategic priorities of driving diverse high-quality revenue streams, improving profit margins, and strengthening its financial position.
Positive Outlook
- Improved year-over-year Adjusted Gross Profit Margin is expected due to a higher full year proprietary brand sales mix.
- Continued benefit from cost savings associated with 2024 restructuring and related productivity initiatives.
- New cost savings are planned for 2025.
- Minimal non-restructuring inventory reserves or related charges are anticipated.
- Reduced year-over-year Adjusted SG&A expense is expected from full year benefit of reductions completed in 2024 and further reductions in professional and outside service fees, facilities, and insurance expense.
Challenges Ahead
- High tariffs on imported products from China, or new tariffs from other countries, could impact the cost of certain products.
- Potential tariffs may negatively impact the Company's 2025 financial performance.
- The company has withdrawn its full year 2025 outlook for net sales, Adjusted EBITDA, and Free Cash Flow due to macroeconomic uncertainty and prolonged cannabis industry headwinds.
- The company's current stock prices are at depressed levels, and any equity financing would be dilutive.
- The market in which the Company operates has been substantially adversely impacted by conditions of the agricultural and cannabis industries, including oversupply and decreasing prices of the products the Company's end customers sell.