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Sep 30, 2024
Hydrofarm Q3 2024 Earnings Report
Reported a decrease in net sales but an improvement in gross profit margin and net loss, while reaffirming its 2024 outlook on key metrics.
Key Takeaways
Hydrofarm Holdings Group reported a decrease in net sales to $44.0 million compared to $54.2 million in the prior year period. However, the company saw an increase in gross profit margin to 19.4% from 6.1% and an improvement in net loss to $13.1 million from $19.9 million. The company reaffirms its full year 2024 outlook on key metrics.
Net sales decreased to $44.0 million compared to $54.2 million.
Gross Profit Margin increased to 19.4% compared to 6.1%.
Net loss improved to $13.1 million compared to $19.9 million.
Adjusted EBITDA remained positive.
Hydrofarm
Hydrofarm
Forward Guidance
The Company is reaffirming its full year 2024 outlook on Key Metrics: Net sales to decrease low to high teens in percentage terms, tracking toward the middle of the range. Adjusted EBITDA that is positive. Free Cash Flow that is positive.
Positive Outlook
- Net sales to decrease low to high teens in percentage terms, tracking toward the middle of the range.
- Adjusted EBITDA that is positive.
- Free Cash Flow that is positive.
- 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.
Challenges Ahead
- Adjusted Gross Profit Margin that is flat to slightly down compared to the prior year. This is an update to the prior expectation of a year-over-year improvement.
- Capital expenditures of $2.5 million to $3.5 million, compared to the prior expectation of $3.5 million to $4.5 million.
- 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.
- Although equity financing may be available, the Company's current stock prices are at depressed levels and any such financing would be dilutive.