Hydrofarm(US:HYFM)2023-11-09 21:33Financial Performance - Total consolidated net sales for the three months ended September 30, 2023, were $54.168 million, a decrease of 27% compared to $74.155 million for the same period in 2022[59]. - For the nine months ended September 30, 2023, total consolidated net sales were $179.397 million, down from $283.040 million in the same period of 2022, representing a decline of 37%[59]. - Net sales for Q3 2023 were $54.2 million, a decrease of $20.0 million, or 27.0% compared to Q3 2022[142]. - Net sales for the nine months ended September 30, 2023, were $179.4 million, a decrease of $103.6 million, or 36.6% compared to the same period in 2022[142]. - The 27.0% decrease in net sales for Q3 2023 was attributed to a 22% decline in volume of products sold and a 5% decrease in price and mix of products sold[143]. - Net loss for the nine months ended September 30, 2023, was $(49.6) million, a significant improvement of $200.5 million compared to $(250.1) million in the same period in 2022[141]. - Loss from operations for Q3 2023 was $(16.2) million, compared to $(20.3) million in Q3 2022, reflecting a 20.1% improvement[141]. Restructuring and Impairment - The company recorded a goodwill impairment charge of $189.572 million as of June 30, 2022, reducing the goodwill balance to zero due to a decline in market value and customer demand[70]. - The company recorded a net restructuring benefit of $0.2 million for Q3 2023, while net pre-tax charges for the nine months ended September 30, 2023, were $2.0 million[134]. - Total costs incurred relating to the first phase of the Restructuring Plan since its commencement were $6.4 million for inventory markdowns and $3.2 million for facility relocations[134]. - Estimated pre-tax charges for the second phase of the Restructuring Plan were $7.8 million, primarily related to non-cash raw material inventory write-downs[135]. - The company anticipates annualized cost savings of approximately $1.5 million from the restructuring efforts[135]. Cash Flow and Liquidity - Net cash from operating activities was $8.6 million for the nine months ended September 30, 2023, driven by a $11.7 million net cash inflow from a reduction in working capital[157]. - Net cash used in investing activities was $4.1 million for the nine months ended September 30, 2023, compared to $7.4 million for the same period in 2022[159]. - Net cash from financing activities was $6.6 million for the nine months ended September 30, 2023, primarily driven by $8.6 million of proceeds from a Sale-Leaseback Transaction[160]. - The company had cash and cash equivalents of $32.5 million as of September 30, 2023, compared to $21.3 million at December 31, 2022[175]. - Approximately $28 million was available to borrow under the Revolving Credit Facility as of September 30, 2023[173]. Assets and Liabilities - The company’s property, plant, and equipment, net, was $104.774 million as of September 30, 2023, compared to $116.400 million as of December 31, 2022[59]. - Total inventories decreased to $80,101 as of September 30, 2023, from $111,398 as of December 31, 2022, reflecting a 28% reduction[78]. - The total lease liabilities as of September 30, 2023, amounted to $68,278, slightly up from $67,302 as of December 31, 2022[82]. - As of September 30, 2023, total debt amounted to $118,464, a decrease from $118,768 as of December 31, 2022, reflecting a reduction of approximately 0.26%[86]. - The outstanding principal balance on the Term Loan was $122,813, a slight decrease from $123,750 as of December 31, 2022[91]. Stock-Based Compensation - The Company granted 1,091,726 Restricted Stock Units (RSUs) during the nine months ended September 30, 2023, with a weighted average grant date fair value of $1.19[113]. - The total unamortized stock-based compensation cost related to unvested RSUs was $3,022, with a weighted-average recognition period of 1.29 years as of September 30, 2023[113]. - The Company recognized $1,073 and $3,501 of total stock-based compensation expense for RSUs for the three and nine months ended September 30, 2023, respectively[113]. - The balance of Performance Stock Units (PSUs) as of September 30, 2023, was 928,070, with a weighted average grant date fair value of $1.77[115]. Taxation - The Company recorded an income tax expense of $89 for the three months ended September 30, 2023, representing an effective tax rate of (0.4)%[118]. - The Company recorded an income tax benefit of $82 for the nine months ended September 30, 2023, representing an effective income tax rate of 0.2%[118]. Compliance and Governance - The Company is in compliance with all covenants related to the Term Loan and Revolving Credit Facility as of September 30, 2023[92][97]. - There were no changes in internal control over financial reporting that materially affected the company's controls during the reporting period[186].