Tue, May 13, 12:34 PM (39 days ago)
### Hydrofarm Holdings Group, Inc. (HYFM) Q1 2025 Financial Summary **Financial Health and Performance:** - **Revenue:** Q1 2025 revenue was $40.5 million, a 25.2% decrease from $54.2 million in Q1 2024. This decline was driven by a 22.6% reduction in volume and a 1.8% decrease in price, largely due to oversupply in the cannabis industry. - **Profit Margins:** Gross profit margin decreased to 17.0% in Q1 2025 from 20.2% in Q1 2024, reflecting lower net sales and a lower proportion of proprietary brand products sold. - **Operating Expenses:** Selling, general, and administrative (SG&A) expenses decreased by 9.0% to $17.9 million, primarily due to cost-saving and restructuring initiatives. - **Net Loss:** Net loss widened to $14.4 million in Q1 2025 from $12.6 million in Q1 2024, reflecting the decline in revenue and higher operating expenses. **Cash Flow and Liquidity:** - **Operating Activities:** Net cash used in operating activities was $11.8 million in Q1 2025, primarily due to a $14.4 million net loss and an $8.3 million increase in working capital. - **Investing Activities:** Net cash used in investing activities was $0.2 million, mainly for capital expenditures. - **Financing Activities:** Net cash used in financing activities was $0.4 million, primarily for Term Loan repayments and finance lease principal payments. - **Cash Position:** Cash and cash equivalents decreased to $13.7 million at the end of Q1 2025 from $26.1 million at the end of 2024. **Debt and Leases:** - **Term Loan:** The company has a $119.0 million Term Loan with variable interest rates. As of Q1 2025, the company is in compliance with all debt covenants. - **Revolving Credit Facility:** The facility was amended to extend the maturity date to June 30, 2027, and reduce the maximum commitment amount to $22.0 million. - **Leases:** The company has operating and finance leases with significant future lease payments, primarily for distribution centers and manufacturing facilities. **Restructuring and Future Operations:** - **Restructuring Plan:** The company completed a second phase of its restructuring plan, incurring $9.7 million in non-cash charges and $2.0 million in cash charges. This phase included U.S. manufacturing facility consolidations and inventory markdowns. - **Asset Sale:** The company sold assets related to its IGE branded products for approximately $8.7 million, retaining the proprietary brand and customer relationships. - **Future Operations:** The company continues to evaluate its product portfolio and supply chain to improve efficiency and reduce costs. It may execute additional restructuring actions depending on market conditions and industry trends. **Uncertainties and Risks:** - **Market Conditions:** The company faces uncertainties due to adverse market conditions, including oversupply in the cannabis industry and potential tariffs or trade disruptions. - **Regulatory Environment:** The company is closely monitoring regulatory changes, particularly in the cannabis industry, which could impact demand for its products. - **Financial Covenants:** The company must comply with financial covenants under its Term Loan and Revolving Credit Facility, which could impact its ability to raise additional capital or execute strategic initiatives. **Conclusion:** Hydrofarm Holdings Group, Inc. faced significant challenges in Q1 2025, with declining revenue and widening net loss. The company is actively managing its costs and restructuring its operations to navigate adverse market conditions. However, it remains subject to various uncertainties and risks that could impact its future performance.