Company Performance - Hydrofarm Holdings Group, Inc. (HYFM) reported a quarterly loss of $0.26 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.23, and compared to a loss of $0.25 per share a year ago, indicating an earnings surprise of -13.04% [1] - The company posted revenues of $44.01 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 6.36%, and down from $54.17 million in the same quarter last year [2] - Over the last four quarters, Hydrofarm has surpassed consensus EPS estimates only once and has topped consensus revenue estimates two times [2] Stock Performance - Hydrofarm shares have declined approximately 35.9% since the beginning of the year, contrasting with the S&P 500's gain of 24.3% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.28 on revenues of $41 million, and for the current fiscal year, it is -$0.99 on revenues of $197 million [7] Industry Outlook - The Agriculture - Products industry, to which Hydrofarm belongs, is currently ranked in the bottom 24% of over 250 Zacks industries, suggesting a challenging environment for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Hydrofarm's stock performance [5]

Financial Performance - Net sales decreased by 18.8% to $44.0 million compared to $54.2 million in the prior year period[4] - Net loss improved to $13.1 million, or $(0.29) per diluted share, compared to a net loss of $19.9 million, or $(0.44) per diluted share in the prior year[7] - Adjusted EBITDA decreased to less than $0.1 million, down from $0.5 million in the prior year[8] - Free cash flow was $(5.3) million during the three months ended September 30, 2024, a decrease from the same period last year[10] - Adjusted EBITDA (Non-GAAP) was $20 thousand for the three months ended September 30, 2024, compared to $495 thousand for the same period in 2023[21] - The company reported a net loss (GAAP) of $(13,146) thousand for the three months ended September 30, 2024, compared to a net loss of $(19,884) thousand for the same period in 2023[21] Profitability Metrics - Gross profit margin increased to 19.4% of net sales, up from 6.1% in the prior year[5] - Adjusted gross profit margin increased to 24.3% of net sales compared to 23.0% in the prior year[5] - Gross profit margin (GAAP) improved to 19.4% for the three months ended September 30, 2024, compared to 6.1% for the same period in 2023[18] - Adjusted gross profit margin (Non-GAAP) was 24.3% for the three months ended September 30, 2024, slightly down from 24.0% in the previous year[18] Expenses and Cost Management - SG&A expense decreased by more than 10% to $17.6 million from $19.5 million in the prior year[2] - Selling, general and administrative expenses (GAAP) were $17,556 thousand for the three months ended September 30, 2024, down from $19,543 thousand in the same period of 2023[20] - Adjusted SG&A excludes specific expenses to reflect the company's selling, general, and administrative costs more accurately[32] Cash Flow and Liquidity - The company ended the third quarter with $24.4 million in cash and approximately $17 million of available borrowing capacity[10] - Net cash used in operating activities was $(4,467) thousand for the three months ended September 30, 2024, compared to $7,668 thousand for the same period in 2023[22] - Free cash flow (Non-GAAP) was $(5,279) thousand for the three months ended September 30, 2024, compared to $6,918 thousand in the same period of 2023[22] - Liquidity is calculated as total cash and equivalents plus available borrowing capacity, reflecting the company's financial flexibility[35] Balance Sheet and Financial Position - Total current assets decreased from $128,066 thousand on December 31, 2023, to $103,402 thousand on September 30, 2024, a decline of approximately 19.3%[17] - Total liabilities decreased from $217,033 thousand on December 31, 2023, to $202,959 thousand on September 30, 2024, a reduction of approximately 6.5%[17] - The accumulated deficit increased to $(539,948) thousand as of September 30, 2024, from $(490,744) thousand on December 31, 2023[17] Future Outlook - The company reaffirms its full year 2024 outlook, expecting net sales to decrease in the low to high teens percentage range[11] - Capital expenditures are projected to be between $2.5 million and $3.5 million, down from the previous expectation of $3.5 million to $4.5 million[10] Non-GAAP Financial Measures - The company reports financial results in accordance with GAAP, but also provides non-GAAP financial measures for additional insights into performance[27] - Key non-GAAP metrics include Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Free Cash Flow, Net Debt, and Liquidity, which are presented as a percentage of net sales[28] - Adjusted EBITDA is defined as net loss excluding various expenses, providing a clearer view of ongoing operating performance[29] - Adjusted Gross Profit excludes certain costs and is used to evaluate the company's operational efficiency[30] - Adjusted Gross Profit Margin is calculated as Adjusted Gross Profit divided by net sales for the respective period[31] - Free Cash Flow is defined as net cash from operating activities minus capital expenditures, indicating the company's cash generation ability[34] - Net Debt is defined as total debt minus cash and equivalents, providing insight into the company's leverage position[35]

SHOEMAKERSVILLE, Pa., Oct. 09, 2024 (GLOBE NEWSWIRE) -- Hydrofarm Holdings Group, Inc. ("Hydrofarm" or the "Company") (Nasdaq: HYFM), a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture ("CEA"), today announced that the Company was featured on the WTR Small-Cap Spotlight with Jesse Redmond, Head of Cannabis at Water Tower Research ("WTR"). The episode is now available for replay on Apple Podcasts, Spotify, and all podcast pl ...

SHOEMAKERSVILLE, Pa., Sept. 18, 2024 (GLOBE NEWSWIRE) -- Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM) (the "Company," or "Hydrofarm,"), a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, announced today that it has received a 180 calendar day extension, until March 10, 2025, from the Nasdaq Stock Market ("Nasdaq"), to regain compliance with Nasdaq Marketplace Rule 5550(a)(2) (the "Bid Price Rule"). The Bid Price Rule stip ...

ST. PETERSBURG, FL, Sept. 12, 2024 (GLOBE NEWSWIRE) -- Water Tower Research (www.watertowerresearch.com) has published an Initiation of Coverage Report on Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM) titled, "Best-in-Class Execution in a Long-Term Favorable Growth Category." The report can be accessed here. Hydrofarm is a non-plant touching, NASDAQ-listed, leading manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture (CEA). The company's products ...

Core Insights - Hydrofarm Holdings Group, Inc. reported a quarterly loss of $0.28 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.23, and compared to a loss of $0.21 per share a year ago, indicating a negative earnings surprise of -21.74% [1] - The company generated revenues of $54.79 million for the quarter ended June 2024, exceeding the Zacks Consensus Estimate by 3.38%, but down from $63.05 million in the same quarter last year [2] - Hydrofarm shares have declined approximately 41.9% year-to-date, contrasting with a 9% gain in the S&P 500 [3] Financial Performance - Over the last four quarters, Hydrofarm has surpassed consensus EPS estimates only once [2] - The current consensus EPS estimate for the upcoming quarter is -$0.23 on revenues of $48 million, and for the current fiscal year, it is -$0.99 on revenues of $198 million [7] Industry Context - The Agriculture - Products industry, to which Hydrofarm belongs, is currently ranked in the bottom 17% of over 250 Zacks industries, suggesting a challenging environment for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Hydrofarm's stock outlook [5]

The conference call can be accessed live over the phone by dialing 1-800-267-6316 and entering the conference ID: HYFMQ2. The conference call will also be webcast live and archived on the corporate website at www.hydrofarm.com, under the "Investors" section. Hydrofarm is a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, including grow lights, climate control solutions, growing media and nutrients, as well as a broad portf ...

Financial Data and Key Metrics Changes - In Q1 2024, net sales were $54.2 million, down 12.9% year-over-year, primarily due to a 12.6% decrease in volume mix related to oversupply in the cannabis industry [12] - Gross profit for Q1 was $10.9 million, compared to $11.4 million in the prior year, while adjusted gross profit was $12.7 million or 23.4% of net sales, up from 14.1% or 22.6% of net sales [13] - Adjusted EBITDA was $0.3 million in Q1, an improvement from a loss of $2.1 million in the prior year, reflecting effective restructuring and cost-saving initiatives [40] Business Line Data and Key Metrics Changes - Consumable products represented approximately 76% of sales in Q1, up from 72% in the same period last year, driven by growth in proprietary brands [37] - Proprietary brands accounted for approximately 57% of total net sales, consistent with the prior year [37] Market Data and Key Metrics Changes - Non-cannabis and non-North American revenue sources increased to an estimated 32% of sales, representing a 360-basis point increase from the prior year [35] - The regulatory environment for U.S. cannabis growers is improving, which is expected to drive future sales [35] Company Strategy and Development Direction - The company aims to innovate and expand its brands to address growers' needs, exemplified by the launch of a new photo bio LED light that offers improved performance at a lower price [10] - The sale of IGE products is part of a strategy to focus on consumables, where 75% of business is currently generated, indicating a shift towards a more streamlined product portfolio [25] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about recent sales trends, noting five consecutive months of sequential sales growth, the longest since the IPO in 2020 [11][66] - The company reaffirmed its full-year guidance, expecting net sales to decline in the low to high teens percentage-wise, while maintaining positive adjusted EBITDA and free cash flow for the year [42][36] Other Important Information - The company achieved a significant improvement in free cash flow, with nearly $7 million improvement from the prior year, driven by positive adjusted EBITDA and disciplined inventory management [17] - The company has maintained a zero balance on its revolving credit facility for nine consecutive quarters, indicating strong liquidity management [41] Q&A Session Summary Question: What is the expectation for top-line progression? - Management indicated that while they are encouraged by recent trends, they are being cautious due to the strong performance in the previous year and do not want to get ahead of themselves [20][46] Question: How significant is the IGE product line in terms of revenue? - IGE products currently represent less than 10% of total sales, and the sale of these products is expected to improve profit margins without significantly impacting overall revenue [22][50] Question: What are the implications of the improving regulatory environment? - Management noted that potential changes in cannabis classification could lead to increased investment in the industry, benefiting the company in the long term [28][58] Question: How is the company positioned in emerging markets like Ohio and Germany? - The company is actively moving resources to capitalize on opportunities in Ohio and Germany, which are seen as favorable markets for growth [29][55]

[Part I - Financial Information](index=5&type=section&id=Part%20I%20-%20Financial%20Information) This section details the company's financial performance, condition, and cash flows, along with management's analysis, market risk exposures, and internal control effectiveness [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Q1 2024 saw an improved net loss, decreased total assets, and significantly improved, though still negative, operating cash flow [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $24,152 | $30,312 | | Inventories | $72,315 | $75,354 | | Total current assets | $123,974 | $128,066 | | Total assets | $494,016 | $507,643 | | **Liabilities & Equity** | | | | Total current liabilities | $39,324 | $37,652 | | Long-term debt | $115,390 | $115,412 | | Total liabilities | $215,987 | $217,033 | | Total stockholders' equity | $278,029 | $290,610 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $54,172 | $62,178 | | Gross profit | $10,925 | $11,381 | | Loss from operations | $(8,696) | $(13,050) | | Net loss | $(12,608) | $(16,849) | | Net loss per share (Basic & Diluted) | $(0.28) | $(0.37) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,297) | $(8,950) | | Net cash used in investing activities | $(1,408) | $(1,602) | | Net cash (used in) from financing activities | $(2,358) | $7,959 | | **Net decrease in cash** | **$(6,160)** | **$(2,588)** | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) - The company operates as a single reportable segment, focusing on the distribution and manufacture of Controlled Environment Agriculture (CEA) equipment and supplies across the United States and Canada[39](index=39&type=chunk) - A second phase of the Restructuring Plan, focusing on U.S. manufacturing facility consolidations, resulted in **$138 thousand** in pre-tax restructuring charges in Q1 2024[37](index=37&type=chunk) - As of March 31, 2024, the Term Loan's outstanding principal balance was **$120.5 million**, with **zero** borrowed under the **$55 million** Revolving Credit Facility[74](index=74&type=chunk)[82](index=82&type=chunk) - Post-quarter, on May 10, 2024, the company agreed to sell assets for durable equipment production for approximately **$8.7 million**, expecting a **$12.0 million** loss on disposition in Q2 2024[106](index=106&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes adverse results to agricultural oversupply, initiating a restructuring plan that improved gross margin and narrowed operating loss Results of Operations Comparison (in thousands) | | Q1 2024 | Q1 2023 | Period Change ($) | Period Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $54,172 | $62,178 | $(8,006) | -12.9% | | Gross profit | $10,925 | $11,381 | $(456) | -4.0% | | Loss from operations | $(8,696) | $(13,050) | $4,354 | 33.4% | | Net loss | $(12,608) | $(16,849) | $4,241 | 25.2% | - The **12.9% decrease** in net sales was primarily driven by a **12.6% decline** in product volume/mix, attributed to oversupply in the cannabis industry[120](index=120&type=chunk) - Gross profit margin improved to **20.2%** from **18.3%** year-over-year, mainly due to enhanced manufacturing productivity from restructuring and cost-saving initiatives[121](index=121&type=chunk)[122](index=122&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **$4.8 million**, or **19.7%**, due to cost-saving measures reducing facility, professional services, insurance, and salary costs[123](index=123&type=chunk) - The second phase of the Restructuring Plan, focusing on U.S. manufacturing consolidation, may incur additional charges exceeding **$2.0 million** and is expected to yield annualized cost savings of approximately **$1.5 million**[116](index=116&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include interest rate exposure from the variable-rate Term Loan and foreign currency fluctuations from Canadian and European operations - The company is exposed to interest rate risk on its **$120.5 million** variable-rate Term Loan debt, where a hypothetical **100 basis point (1%) increase** would raise annual interest expense by an average of **$1.1 million**[154](index=154&type=chunk) - Foreign currency risk arises from operations with functional currencies in Canadian dollars (CAD) and Euros, impacting sales, purchases, and cash flows due to exchange rate fluctuations[155](index=155&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2024[158](index=158&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[160](index=160&type=chunk) [Part II - Other Information](index=40&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, updated risk factors including potential Nasdaq delisting, and other significant corporate developments [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any legal proceedings or claims expected to materially affect its business or financial condition - The company reports **no material legal proceedings**[162](index=162&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) A material risk factor change is the Nasdaq notice of non-compliance for minimum bid price, with a compliance period until September 10, 2024 - On March 14, 2024, the company received a notice from Nasdaq for failing to meet the minimum bid price requirement of **$1.00 per share** for **30 consecutive business days**[165](index=165&type=chunk) - The company has a **180-day compliance period**, until September 10, 2024, to regain compliance by having its stock close at or above **$1.00** for at least **10 consecutive business days**[165](index=165&type=chunk) [Other Information](index=41&type=section&id=Item%205.%20Other%20Information) The company agreed to sell certain durable equipment production assets for **$8.7 million** in Q2 2024, including an exclusive five-year supply agreement - The company agreed to sell certain assets related to durable equipment production for approximately **$8.7 million** in a transaction expected to close in Q2 2024[171](index=171&type=chunk) - As part of the deal, the company will enter into an **exclusive supply agreement** with the buyer for an initial term of **five years** to ensure continued availability of the products[173](index=173&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including equity incentive plan grant notices and required CEO/CFO certifications

Exhibit 99.1 First Quarter 2024 Highlights vs. Prior Year Period: (1) Adjusted Gross Profit (Loss), Adjusted Gross Profit Margin, Adjusted SG&A, Adjusted SG&A as a percent of net sales, Adjusted EBITDA, and Free Cash Flow are non-GAAP measures. For reconciliations of non-GAAP to GAAP measures see the "Reconciliation of Non-GAAP Measures" accompanying the release. Bill Toler, Chairman and Chief Executive Officer of Hydrofarm, said, "We are pleased with our first quarter results, as we delivered Adjusted Gros ...