Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $39.2 million, down 28.4% year over year, primarily due to a 27.9% decline in volume mix and a 0.4% decline in pricing [15][21] - Gross profit in Q2 was $2.8 million, or 7.1% of net sales, compared to $10.9 million, or 19.8% of net sales in the prior year [17] - Adjusted EBITDA was a loss of $2.3 million in Q2, with a sequential improvement compared to Q1 2025 [21] Business Line Data and Key Metrics Changes - Consumable products accounted for approximately 80% of sales in Q2, outperforming durable products [17] - The company initiated a restructuring plan to rationalize over one third of SKUs and brands, focusing on higher-margin proprietary brands [10][19] Market Data and Key Metrics Changes - International sales improved year on year, particularly in select European and Asian countries [8] - The company faced industry headwinds, including oversupply challenges and minimal government progress on banking regulations, impacting demand [6][8] Company Strategy and Development Direction - The primary strategic priority is to drive diverse, high-quality revenue streams, with a focus on proprietary consumables [9][13] - The restructuring plan aims to streamline the product portfolio and reduce costs, with expected annual savings exceeding $3 million [10][19] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about an eventual demand turnaround in the industry despite current challenges [23] - The company is focused on managing tariff impacts and optimizing its product portfolio to improve profitability [12][13] Other Important Information - The company achieved positive free cash flow of $1.4 million in Q2, with expectations to maintain positive free cash flow for the last nine months of 2025 [22] - Cash balance as of June 30, 2025, was $11 million, with total liquidity of $20 million [22] Q&A Session Summary Question: Impact of tariffs and expectations moving forward - Management acknowledged the difficulty in predicting tariff impacts but noted success in managing incremental costs thus far [25][26] Question: Product portfolio optimization and its impact - Management clarified that while they are reducing third-party products, they will maintain a broad offering and focus on high-margin proprietary brands [29][30] Question: Growth in non-cannabis business - Management confirmed ongoing efforts to grow the non-cannabis segment, with positive performance in international sales and e-commerce [34][35] Question: Potential reclassification of cannabis - Management expressed cautious optimism regarding potential reclassification, noting it could positively impact the industry [38][39]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number: 001-39773 Hydrofarm Holdings Group, Inc. (Exact name of registrant as specified in its charter) Former Name or Former Address, if change ...

Second Quarter 2025 Earnings Presentation August 12th, 2025 Disclaimer Forward-Looking Statements. This presentation contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact included in this presentation are forward-lookin ...

[Hydrofarm Holdings Group Q2 2025 Earnings Release](index=1&type=section&id=Hydrofarm%20Holdings%20Group%20Q2%202025%20Earnings%20Release) [Second Quarter 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Highlights) The company saw a significant revenue decline in Q2 2025 due to industry headwinds but continued cost reductions and generated positive free cash flow Q2 2025 Key Financial Metrics vs Prior Year | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $39.2 million | $54.8 million | -28.4% | | Gross Profit Margin | 7.1% | 19.8% | -12.7 p.p. | | Adjusted Gross Profit Margin | 19.2% | 24.4% | -5.2 p.p. | | Adjusted SG&A Expense | $9.8 million | $11.6 million | -15.7% | | Net Loss | $(16.9) million | $(23.5) million | Improved | | Adjusted EBITDA | $(2.3) million | $1.7 million | Decreased | | Free Cash Flow | $1.4 million | $3.4 million | Decreased | - The company initiated a new restructuring plan designed to further reduce costs by optimizing its product portfolio and right-sizing its manufacturing and distribution footprint[4](index=4&type=chunk) - Management highlighted the **12th consecutive quarter** of significant year-over-year Adjusted SG&A expense reductions, which helped generate positive Free Cash Flow of **$1.4 million**[4](index=4&type=chunk) [Detailed Financial Results (Q2 2025)](index=1&type=section&id=Detailed%20Financial%20Results%20(Q2%202025)) The company experienced a 28.4% decrease in net sales, a significant gross profit impact from restructuring costs, and reduced SG&A expenses [Net Sales](index=1&type=section&id=Net%20Sales) - Net sales decreased by **28.4% to $39.2 million** from $54.8 million in the prior year period[5](index=5&type=chunk) - The decline was driven by a **27.9% decrease in volume/mix** of products sold, mainly due to industry oversupply, and a 0.4% decrease in price[5](index=5&type=chunk) [Gross Profit](index=1&type=section&id=Gross%20Profit) Gross Profit Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross Profit | $2.8 million | $10.9 million | | Gross Profit Margin | 7.1% | 19.8% | | Adjusted Gross Profit | $7.5 million | $13.3 million | | Adjusted Gross Profit Margin | 19.2% | 24.4% | - Gross profit was negatively impacted by **$3.3 million in non-cash restructuring costs** in Q2 2025, with the margin decline also driven by lower sales and an unfavorable product mix[6](index=6&type=chunk) [Selling, General and Administrative (SG&A) Expense](index=2&type=section&id=Selling%2C%20General%20and%20Administrative%20(SG%26A)%20Expense) SG&A Expense Reduction (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | SG&A Expense (GAAP) | $16.1 million | $18.7 million | | Adjusted SG&A (Non-GAAP) | $9.8 million | $11.6 million | - The reduction in SG&A was mainly driven by the company's restructuring actions and cost-saving initiatives, leading to lower compensation, insurance, and facility costs[8](index=8&type=chunk) [Net Loss and Adjusted EBITDA](index=2&type=section&id=Net%20Loss%20and%20Adjusted%20EBITDA) Profitability Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Loss | $(16.9) million | $(23.5) million | | Diluted EPS | $(3.63) | $(5.10) | | Adjusted EBITDA | $(2.3) million | $1.7 million | - The net loss improved year-over-year, partially due to SG&A expense reductions and a prior-year loss on an asset sale; however, **Adjusted EBITDA decreased**, reflecting lower sales and gross profit[8](index=8&type=chunk)[9](index=9&type=chunk) [Strategic Initiatives and Outlook](index=2&type=section&id=Strategic%20Initiatives%20and%20Outlook) The company initiated a new restructuring plan to yield annual savings while reaffirming its full-year 2025 financial expectations [Restructuring Plan](index=2&type=section&id=Restructuring%20Plan) - A new restructuring plan was initiated in Q2 2025 to narrow the product portfolio, reduce the operational footprint, and improve efficiency[9](index=9&type=chunk) - The company incurred estimated restructuring costs of **$3.3 million** in Q2 2025, primarily from non-cash inventory write-downs[9](index=9&type=chunk) - The plan is expected to generate annual cost savings exceeding **$3 million**, plus additional working capital reductions[9](index=9&type=chunk) [Reaffirmed Full Year 2025 Expectations](index=2&type=section&id=Reaffirmed%20Full%20Year%202025%20Expectations) - The company reaffirmed its guidance for fiscal year 2025, which includes improved Adjusted Gross Profit Margin, reduced Adjusted SG&A, positive free cash flow for the final nine months, and capital expenditures under $2 million[11](index=11&type=chunk)[12](index=12&type=chunk) - Potential high tariffs on imported products from China or other countries are noted as a risk that could negatively impact 2025 financial performance[11](index=11&type=chunk) [Balance Sheet, Liquidity and Cash Flow](index=2&type=section&id=Balance%20Sheet%2C%20Liquidity%20and%20Cash%20Flow) The company maintained a stable liquidity position, generated positive free cash flow, and made a prepayment on its term loan Liquidity and Debt Position as of June 30, 2025 | Metric | Amount | | :--- | :--- | | Cash | $11.0 million | | Available Borrowing Capacity | ~$9 million | | Term Loan Principal Outstanding | $114.5 million | | Revolving Credit Facility Balance | $0 | - The company was in compliance with all debt covenants and extended the maturity of its Revolving Credit Facility to June 30, 2027[10](index=10&type=chunk) Q2 2025 Cash Flow Summary | Metric | Amount | | :--- | :--- | | Cash from Operating Activities | $1.7 million | | Capital Expenditures | $0.3 million | | Free Cash Flow | $1.4 million | [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated Statement of Operations and Balance Sheet as of June 30, 2025 [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Highlights (Three Months Ended June 30) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $39,245 | $54,793 | | Gross profit | $2,794 | $10,851 | | Selling, general and administrative | $16,140 | $18,659 | | Loss from operations | $(13,346) | $(19,328) | | Net loss | $(16,861) | $(23,450) | | Net loss per share, diluted | $(3.63) | $(5.10) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (As of) | (In thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,991 | $26,111 | | Inventories | $44,164 | $50,633 | | Total current assets | $73,040 | $95,212 | | Total assets | $389,875 | $426,104 | | Total current liabilities | $31,479 | $34,987 | | Long-term debt | $111,559 | $114,693 | | Total liabilities | $194,866 | $202,382 | | Total stockholders' equity | $195,009 | $223,722 | [Non-GAAP Financial Measures](index=8&type=section&id=Non-GAAP%20Financial%20Measures) The company provides reconciliations from GAAP to non-GAAP measures to offer additional information for evaluating performance [Reconciliation of Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) Reconciliation of Net Loss to Adjusted EBITDA (Three Months Ended June 30) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net loss (GAAP) | $(16,861) | $(23,450) | | Interest expense | $3,391 | $3,811 | | Income tax (benefit) expense | $(98) | $390 | | Depreciation, depletion and amortization | $7,412 | $7,776 | | Restructuring expenses | $3,321 | $927 | | Stock-based compensation | $289 | $769 | | Loss on asset disposition | $— | $11,520 | | **Adjusted EBITDA (Non-GAAP)** | **$(2,272)** | **$1,725** | Reconciliation of Free Cash Flow (Three Months Ended June 30) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities (GAAP) | $1,716 | $3,784 | | Capital expenditures | $(281) | $(368) | | **Free Cash Flow (Non-GAAP)** | **$1,435** | **$3,416** | [Definitions of Non-GAAP Measures](index=10&type=section&id=Definitions%20of%20Non-GAAP%20Measures) - Adjusted EBITDA is defined as net loss excluding interest expense, taxes, depreciation and amortization, stock-based compensation, restructuring expenses, and other non-cash or infrequent costs[30](index=30&type=chunk) - Free Cash Flow is defined as net cash from operating activities less capital expenditures for property, plant, and equipment[35](index=35&type=chunk)

Industry Overview - The Zacks Agriculture - Products industry is facing challenges due to lower commodity prices, high input costs, and labor shortages, but increasing consumer awareness regarding food ingredients and healthier alternatives is expected to support growth [1][4] - The industry includes companies involved in storing agricultural commodities, distributing ingredients, and farming crops, livestock, and poultry products [3] Current Trends - Agricultural commodity prices are under pressure from ample supply, while rising labor, packaging, and distribution costs are impacting profitability [4] - Global food demand is projected to increase by 50% by 2050 due to population growth, with the global population expected to reach 9.6 billion [5] - Hydroponics and vertical farming are emerging as key agricultural technologies, with hydroponic equipment sales projected to reach $67 billion by 2033, growing at a CAGR of 16.2% [6] Company Insights - **Bunge Global S.A.** is focusing on strategic mergers, including a $34 billion merger with Viterra Ltd, to enhance its position in grain exports and oilseed processing [18][19] - **CalMaine Foods** is expanding its cage-free operations and product portfolio, with a projected earnings growth of 299.5% for fiscal 2025 [22][23] - **Hydrofarm** is streamlining operations and focusing on proprietary brands, with a significant increase in the sales mix of proprietary brands to 55% in Q1 2025 [26][27] Market Performance - The Zacks Agriculture - Products industry has underperformed compared to the Basic Materials sector and the S&P 500, with a 12.9% decline over the past 12 months [9] - The industry is currently trading at an EV/EBITDA ratio of 5.98X, significantly lower than the S&P 500's 17.51X [12][17]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $40.5 million, down 25.2% year-over-year, primarily due to a 22.6% decrease in volume mix and a 1.8% decline in pricing [17] - Gross profit was $6.9 million, or 17% of net sales, compared to $10.9 million, or 20.2% of net sales in the prior year [18] - Adjusted EBITDA was a loss of $2.4 million in Q1, although it improved by $4.8 million compared to Q4 2024 [22] Business Line Data and Key Metrics Changes - Proprietary brands accounted for 55% of net sales, an improvement from 52% in the previous quarter but down from 56%-58% in the first three quarters of the prior year [17][29] - Consumable products represented over 75% of total sales, showing a small increase over 2024 [18] - Adjusted SG&A expenses were $11 million, an 11% reduction compared to $12.3 million last year, marking the eleventh consecutive quarter of significant year-over-year savings [21] Market Data and Key Metrics Changes - The company experienced prolonged industry oversupply challenges and a lack of government progress on regulatory issues, impacting year-over-year results [12] - The U.S. government clarified that Canadian peat would be tariff-free, which is expected to positively impact the peat moss business moving forward [11] Company Strategy and Development Direction - The company is focusing on higher-margin proprietary brands to drive revenue and improve profitability, with a strategic initiative to enhance sales in these areas [5][6] - A thorough review of the product portfolio and distribution network is underway to align with estimated sales demand and improve gross profit margins [15] - The company is actively pursuing strategic alternatives to enhance shareholder value, including potential acquisitions or divestitures [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about potential regulatory changes regarding cannabis, citing public support for rescheduling and ongoing discussions in Washington [39] - The company has withdrawn its full-year 2025 guidance due to tariff uncertainties and prolonged industry challenges but maintains expectations for improved adjusted gross profit margins and lower SG&A expenses [14][42] Other Important Information - The company ended Q1 with a cash balance of $13.7 million and total debt of approximately $127.3 million [23] - Cash used in operating activities was negative $11.8 million, with negative free cash flow of $12 million for the quarter [25] Q&A Session Summary Question: Follow-up on proprietary brand sales and growth outlook - Management noted that proprietary nutrient brands performed better than expected and emphasized continued investment in sales capabilities and marketing efforts to drive growth [29][30] Question: Impact of tariffs on product costs and demand - Management explained that while consumable products are largely insulated from tariffs, durable products sourced from China face challenges, and they are renegotiating with vendors to manage costs [31][34] Question: Regulatory environment and optimism for cannabis market - Management highlighted positive momentum in Washington regarding cannabis rescheduling and safer banking, which could benefit the industry [37][39] Question: Granularity on positive developments in the quarter - Management pointed to strong performance in proprietary consumables and ongoing product launches in the U.S. and international markets as positive signs [40][41] Question: Outlook for 2025 amidst uncertainties - Management reiterated that while Q1 performance was in line with previous expectations, the uncertainty surrounding tariffs and industry conditions led to the decision to pause guidance for the year [42][43]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $40.5 million, down 25.2% year over year, primarily due to a 22.6% decrease in volume mix and a 1.8% decline in pricing [18] - Gross profit in Q1 was $6.9 million, or 17% of net sales, compared to $10.9 million, or 20.2% of net sales in the prior year [19] - Adjusted EBITDA was a loss of $2.4 million in Q1, although it improved by $4.8 million compared to Q4 2024 [23] Business Line Data and Key Metrics Changes - Proprietary brands accounted for 55% of net sales in Q1, an improvement from 52% in Q4 2024, but still below the 56% to 58% range seen in the first three quarters of the previous year [18][30] - Consumable products represented over three-quarters of total sales, showing a small increase over 2024 [19] - Adjusted SG&A expenses were $11 million, an 11% reduction compared to $12.3 million last year, marking the eleventh consecutive quarter of significant year-over-year adjusted SG&A savings [22] Market Data and Key Metrics Changes - The company noted prolonged industry oversupply challenges and a lack of government progress on regulatory issues, which impacted year-over-year results [12] - The U.S. government clarified that Canadian peat would be tariff-free, which is expected to positively impact the peat moss business moving forward [11] Company Strategy and Development Direction - The company is focusing on higher-margin proprietary brands to drive revenue and improve profitability, with a strategic initiative to enhance sales in these areas [5][6] - A thorough review of the product portfolio and distribution network is underway to align better with estimated sales demand and support margin expansion [15] - The company is actively pursuing strategic alternatives to enhance shareholder value, including potential acquisitions or divestitures [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for regulatory changes in the cannabis market, citing recent polling data showing increased public support for rescheduling [40] - The company has withdrawn its full-year 2025 guidance for net sales, adjusted EBITDA, and free cash flow due to ongoing tariff uncertainties and prolonged industry challenges [14][43] - Despite the challenges, management remains committed to improving adjusted gross profit margins and reducing adjusted SG&A expenses for the full year [44] Other Important Information - The company ended Q1 with a cash balance of $13.7 million and total debt of approximately $127.3 million [24] - Cash used in operating activities was negative $11.8 million, yielding negative free cash flow of $12 million for the quarter [25] Q&A Session Summary Question: Follow-up on proprietary brand sales and growth outlook - Management highlighted strong performance from proprietary nutrient brands and emphasized ongoing investments in sales capabilities and marketing efforts to drive growth [31][32] Question: Impact of tariffs on product costs and demand - Management indicated that while consumable products are largely insulated from tariffs, the durable side faces challenges due to sourcing from China, and they are actively renegotiating with vendors [34][35] Question: Regulatory environment and potential changes in the cannabis market - Management expressed optimism about potential regulatory changes, noting recent momentum in rescheduling discussions and efforts to push for safer banking legislation [40][41] Question: Overall outlook for 2025 - Management stated that while Q1 performance was generally in line with previous expectations, the uncertainty surrounding tariffs and industry conditions led to a prudent decision to pause guidance for the year [43][44]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Former Name or Former Address, if changed since last report: Not Applicable (State or other jurisdiction of incorporation or organization) Delaware 81-4895761 (I.R.S. Employer Identificatio ...

Financial Performance - Net sales decreased by 25.2% to $40.5 million compared to $54.2 million in the prior year period, primarily due to a 22.6% decline in volume/mix of products sold and a 1.8% decrease in price [5]. - Gross profit decreased to $6.9 million, representing 17.0% of net sales, down from $10.9 million or 20.2% of net sales in the prior year [6]. - Adjusted gross profit decreased to $8.5 million, or 21.0% of net sales, compared to $12.7 million, or 23.4% of net sales in the prior year [6]. - 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 [9]. - Adjusted EBITDA decreased to $(2.4) million compared to $0.3 million in the prior year period [10]. Cash Flow and Operating Activities - Cash used in operating activities was $(11.8) million, with free cash flow of $(12.0) million during the first quarter [11]. - Free Cash Flow (Non-GAAP) for Q1 2025 was $(12,007) million, compared to $(3,739) million in Q1 2024, indicating a worsening cash flow situation [26]. Expenses - Selling, general and administrative (SG&A) expense decreased by 9.0% to $17.9 million, while adjusted SG&A expense decreased by 11.0% to $11.0 million [7]. - Selling, general and administrative expenses (GAAP) for Q1 2025 were $17,863 million, down from $19,621 million in Q1 2024, a decrease of 9.0% [25]. - Adjusted SG&A (Non-GAAP) for Q1 2025 was $10,980 million, compared to $12,336 million in Q1 2024, a decline of 10.9% [25]. Strategic Outlook - The company is withdrawing its full year 2025 outlook for net sales, adjusted EBITDA, and free cash flow due to macroeconomic uncertainty and prolonged industry headwinds [11]. - The company remains committed to strategic priorities including driving diverse high-quality revenue streams and improving profit margins [12]. Asset and Liability Changes - Total assets decreased from $426,104 million as of December 31, 2024, to $410,557 million as of March 31, 2025, a decline of approximately 3.9% [23]. - Total current liabilities increased from $34,987 million in December 2024 to $39,941 million in March 2025, an increase of approximately 14.0% [23]. Profit Margin - The proprietary brand sales mix increased to 55% compared to 52% in the fourth quarter of 2024, contributing to improvements in gross profit margin [4]. - Gross Profit (GAAP) for Q1 2025 was $6,877 million, down 37.3% from $10,925 million in Q1 2024 [25]. - Adjusted Gross Profit (Non-GAAP) decreased to $8,532 million in Q1 2025, compared to $12,665 million in Q1 2024, reflecting a decline of 32.4% [25]. - Net loss (GAAP) for Q1 2025 was $(14,385) million, compared to $(12,608) million in Q1 2024, representing an increase in loss of 14.1% [26]. - Adjusted EBITDA (Non-GAAP) for Q1 2025 was $(2,448) million, a significant decrease from $329 million in Q1 2024 [26]. - The company reported a Gross Profit Margin (GAAP) of 17.0% for Q1 2025, down from 20.2% in Q1 2024 [25].

Company Overview - Hydrofarm Holdings Group, Inc. is a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture (CEA) [3] - The company offers a range of products including grow lights, climate control solutions, growing media, and nutrients, along with a portfolio of innovative and proprietary branded products [3] - Hydrofarm has over 40 years of experience in helping growers enhance productivity and efficiency in their growing projects [3] Upcoming Events - The company will host a conference call to review first quarter 2025 results on May 13, 2025, at 8:30 AM ET [1] - A press release with the first quarter 2025 results will be issued before market open on the same day [1] - The conference call can be accessed live by phone or via a webcast on the corporate website [2]