Hydrofarm Holdings Group has announced financial results for its first quarter ended March 31, 2025.
First quarter highlights vs. prior year period:
In the first quarter of 2025, net sales experienced a decline, falling to $40.5 million from $54.2 million in the prior year period. The gross profit for this quarter was reported at $6.9 million, with an adjusted gross profit of $8.5 million. The gross profit margin decreased to 17.0% of net sales, down from 20.2%, while the adjusted gross profit margin also saw a decline, reaching 21.0% compared to the previous 23.4%. Selling, General, and Administrative (SG&A) expenses, along with adjusted SG&A expenses, decreased by 9.0% and 11.0%, respectively. Despite these reductions, the net loss increased to $14.4 million from $12.6 million. Additionally, the adjusted EBITDA was $(2.4) million, a decrease from $0.3 million in the prior year. Cash used in operating activities amounted to $(11.8) million, and the free cash flow was reported at $(12.0) million.
John Lindeman, Chief Executive Officer of Hydrofarm, said, "In the first quarter we achieved sequential improvements across the business by reinvigorating the focus on our higher margin proprietary brands, and executing on our strategic priorities. Our proprietary brand sales mix increased to 55% compared to 52% in the fourth quarter of 2024, led by our consumable products, driving substantial improvement in our Adjusted Gross Profit margin sequentially.
We also delivered significant savings in Adjusted SG&A expense, marking our 11th consecutive quarter of meaningful year-over-year expense reductions. While ongoing industry headwinds weighed on year-over-year results, we are controlling what we can and believe that we can build on this progress throughout the year. We are committed to growing our proprietary brand sales mix, further optimizing our distribution network, and implementing additional cost-saving measures, and as we execute on this strategic roadmap, we expect to enhance long-term shareholder value."
Due to macroeconomic uncertainty related to the evolving global tariff policy, and prolonged cannabis industry headwinds, the Company is withdrawing its full year 2025 outlook for net sales, Adjusted EBITDA, and Free Cash Flow.
The company has outlined several performance indicators, assumptions, and action plans for the fiscal year 2025. One potential challenge is the impact of high tariffs on imported products from China or the introduction of new tariffs from other countries, which could increase costs and negatively affect the company's financial performance. On a positive note, the company expects an improved year-over-year adjusted gross profit margin. This improvement is anticipated to stem from a higher mix of proprietary brand sales, continued benefits from cost savings associated with 2024 restructuring and productivity initiatives, and additional cost-saving measures planned for 2025. Furthermore, the company expects minimal non-restructuring inventory reserves or related charges. Adjusted SG&A expenses are projected to decrease year-over-year, benefiting from reductions completed in 2024 and further cuts in professional and outside service fees, as well as facilities and insurance expenses. The company also plans to reduce inventory and generate positive free cash flow for the remainder of 2025. Additionally, capital expenditures for the full year are expected to be less than $2 million.
