Hydrofarm(HYFM) - 2024 Q4 - Annual Results

Financial Performance - Net sales for Q4 2024 decreased by 20.9% to $37.3 million compared to $47.2 million in the prior year period, primarily due to a 16.8% decline in volume/mix and a 3.9% decrease in price[7] - Gross Profit for Q4 2024 was $1.8 million, or 4.9% of net sales, down from $8.4 million, or 17.9% of net sales in the prior year[8] - Adjusted Gross Profit Margin decreased to 9.6% of net sales in Q4 2024 from 24.3% in the prior year, impacted by lower sales and approximately $1.4 million in inventory reserves[8] - Net loss for Q4 2024 increased to $17.5 million, or $(3.80) per diluted share, compared to a net loss of $15.2 million, or $(3.33) per diluted share in the prior year[8] - Adjusted EBITDA for Q4 2024 was $(7.3) million, a decline from $(0.6) million in the prior year period[9] - For the full year 2024, net sales decreased to $190.3 million from $226.6 million, with a Gross Profit of $32.1 million and an Adjusted Gross Profit of $40.3 million[6] Cash Flow and Liquidity - Cash generated from operating activities in Q4 2024 was $2.7 million, with Free Cash Flow of $2.4 million, while for the full year, Free Cash Flow was $(3.2) million[10] - Free cash flow for Q4 2024 was $2.386 million, contrasting with a negative free cash flow of $(1.744) million in Q4 2023[30] - The total gross proceeds from the IGE Asset Sale were $8.7 million, contributing an estimated $3.5 million to Net cash from operating activities and Free Cash Flow for the twelve months ended December 31, 2024[32] - The Company received gross proceeds of $8.6 million from a sale-leaseback of real estate in Eugene, Oregon, classified as a Financing activity for the twelve months ended December 31, 2023[32] Expenses and Cost Management - SG&A expense decreased by 14.7% to $17.0 million in Q4 2024, while Adjusted SG&A expense decreased by 9.8% to $10.8 million[6] - Selling, general and administrative expenses for Q4 2024 were $16.958 million, a decrease of 15% from $19.872 million in Q4 2023[27] - The company aims to improve Adjusted Gross Profit Margin in 2025 through a higher proprietary brand sales mix and continued cost-saving measures[11] Future Outlook - The company expects net sales to decrease by 10-20% in 2025, with negative but improved Adjusted EBITDA and Free Cash Flow compared to 2024[12] Assets and Financial Position - Total current assets decreased to $95.212 million in 2024 from $128.066 million in 2023, primarily due to a reduction in inventories[23] - Total assets decreased to $426.104 million in 2024 from $507.643 million in 2023, reflecting a decline in both current and non-current assets[23] - The accumulated deficit increased to $557.461 million in 2024 from $490.744 million in 2023, indicating ongoing financial challenges[23] Non-GAAP Measures - Adjusted EBITDA is defined as net loss excluding various expenses, providing insight into ongoing operating performance[35] - Adjusted Gross Profit is calculated by excluding depreciation and other expenses, offering a clearer view of profitability[36] - Free Cash Flow is defined as Net cash from operating activities less capital expenditures, indicating the Company's ability to generate cash[39] - Liquidity is defined as total cash, cash equivalents, and available borrowing capacity, reflecting the Company's financial health[40] - Net Debt is calculated as total debt principal outstanding plus finance lease liabilities, less cash and cash equivalents, providing insight into the Company's leverage[40] - The Company emphasizes the importance of non-GAAP financial measures for evaluating performance and comparing metrics over time[33] - Adjusted SG&A is defined as SG&A excluding certain expenses, which aids in assessing operational efficiency[38]