Hydrofarm Q4 2020 Earnings Report
Key Takeaways
Hydrofarm Holdings Group reported a strong fourth quarter in 2020, with net sales increasing by 62.6% compared to the prior year, driven by volume and price/mix improvements. Gross profit also saw significant growth, and Adjusted EBITDA improved substantially. The company successfully completed its IPO during the quarter.
Net sales increased by 62.6% to $87.4 million compared to Q4 2019.
Gross profit increased by 190.5% to $16.0 million with gross margin improving to 18.3%.
Adjusted EBITDA increased to $5.0 million, or 5.7% of net sales, from ($5.7) million in Q4 2019.
Net loss attributable to common stockholders was ($10.0) million, or ($0.43) per diluted share.
Hydrofarm
Hydrofarm
Forward Guidance
The company estimates 20% to 25% organic net sales growth in fiscal 2021. Growth is expected to be dominantly driven by volume with some price increases due to commodity cost inflation. Initiatives are expected to drive favorable sales mix and operating leverage, leading to Adjusted EBITDA margin expansion.
Positive Outlook
- Net sales growth year-to-date is roughly on par with levels realized during Q4 2020.
- Estimating 20% to 25% organic net sales growth in fiscal 2021.
- Growth will be dominantly driven by volume in conjunction with broader demand themes in the CEA industry.
- Ongoing initiatives to drive favorable sales mix of proprietary and preferred brands.
- Initiatives to drive operating leverage on SG&A expenses, excluding stock-based compensation and depreciation/amortization, leading to Adjusted EBITDA margin expansion.
Challenges Ahead
- Outsized growth in the first half to moderate in the second half of 2021.
- Second half of 2021 will lap particularly strong comparable periods in the third and fourth quarter.
- Commodity cost inflation may result in some price increases across the industry during the year.
- 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.