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Dec 31, 2022
Hydrofarm Q4 2022 Earnings Report
Announced fourth quarter and full year 2022 results, highlighting a decrease in net sales and a net loss, but positive free cash flow.
Key Takeaways
Hydrofarm Holdings Group reported a decrease in net sales to $61.5 million compared to $110.4 million in the prior year period. The company experienced a net loss of $(35.3) million, driven by decreased sales and restructuring costs. However, the company generated positive Free Cash Flow of $5.4 million and initiated a restructuring plan to improve cost savings.
Net sales decreased to $61.5 million compared to $110.4 million.
Gross Loss was $(0.5) million compared to gross profit of $18.7 million.
Adjusted EBITDA decreased to $(8.4) million compared to $4.9 million in the prior year period.
Generated net cash from operating activities of $6.5 million and positive Free Cash Flow of $5.4 million.
Hydrofarm
Hydrofarm
Forward Guidance
The Company is providing the following outlook for the full fiscal year 2023: •Net sales of approximately $290 million to $310 million, which assumes that average daily sales levels continue across the first quarter of 2023 at levels similar to those achieved in the fourth quarter of 2022 and a seasonal increase in average daily sales levels begins in early second quarter of 2023. •Adjusted EBITDA(1) that is modestly positive for the full year. •Free Cash Flow(1) that is positive for the full year.
Positive Outlook
- Improved Adjusted Gross Profit resulting primarily from cost savings associated with restructuring and related productivity initiatives
- Improved Adjusted Gross Profit resulting primarily from an expectation of minimal additional inventory and accounts receivable reserves or related charges.
- 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.
Challenges Ahead
- 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, has 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 current stock prices are at depressed levels and any such financing would be dilutive.
- 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