Hydrofarm Holdings Group Announces First Quarter 2025 Results

Core Insights - The company reported a significant decline in net sales and gross profit for the first quarter of 2025, primarily due to an oversupply in the cannabis industry, with net sales decreasing by 25.2% to $40.5 million compared to $54.2 million in the prior year period [5][8][9] - Despite the challenges, the company achieved improvements in its proprietary brand sales mix and continued to implement cost-saving measures, resulting in a reduction of SG&A expenses for the 11th consecutive quarter [4][7][9] - The company has withdrawn its full-year 2025 outlook due to macroeconomic uncertainties and ongoing industry headwinds, while reaffirming its commitment to strategic priorities aimed at improving profit margins and financial position [13][17] Financial Performance - Gross profit decreased to $6.9 million, representing 17.0% of net sales, down from 20.2% in the prior year period, while adjusted gross profit was $8.5 million, or 21.0% of net sales, compared to 23.4% previously [6][9][21] - SG&A expenses were reduced to $17.9 million from $19.6 million year-over-year, with adjusted SG&A expenses decreasing to $11.0 million from $12.3 million [7][9][21] - The net loss for the first quarter was $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 [8][21] Cash Flow and Liquidity - Cash used in operating activities was $(11.8) million, with free cash flow also negative at $(12.0) million for the quarter [12][9] - As of March 31, 2025, the company had $13.7 million in cash and approximately $17.0 million of available borrowing capacity on its revolving credit facility [11][9] - The company maintained compliance with debt covenants and entered into an amendment to extend the maturity date of its revolving credit facility [11][9] Strategic Initiatives - The company is focused on enhancing its proprietary brand sales mix, optimizing its distribution network, and implementing additional cost-saving measures to build long-term shareholder value [4][9] - The management emphasized the importance of controlling internal factors despite external industry challenges, aiming to improve profit margins and strengthen the financial position [4][13]