SHOEMAKERSVILLE, Pa. — Hydrofarm Holdings Group Inc., a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, reported financial results for its second quarter ended June 30, 2025.
Second Quarter Highlights vs. Prior Year Period
- Net sales decreased to $39.2 million compared to $54.8 million.
- Gross Profit Margin decreased to 7.1% of net sales compared to 19.8%.
- Adjusted Gross Profit Margin decreased to 19.2% of net sales compared to 24.4%.
- SG&A expense and Adjusted SG&A expense decreased by (13.5)% and (15.7)%, respectively.
- Net loss decreased to $16.9 million compared to $23.5 million.
- Adjusted EBITDA of $(2.3) million compared to $1.7 million.
- Cash from operating activities and Free Cash Flow were $1.7 million and $1.4 million, respectively.
- Initiated restructuring plan to reduce costs and improve efficiency.
John Lindeman, Chief Executive Officer of Hydrofarm, said, “In the second quarter we delivered nearly 16% of year-over-year Adjusted SG&A expense savings, our 12th consecutive quarter of significant year-over-year expense reductions, which helped generate positive Free Cash Flow of $1.4 million. While our topline was softer than anticipated due to persistent industry headwinds, we did see encouraging performances from certain proprietary brands as well as our international business. As a result of the continued headwinds, we initiated a new restructuring plan designed to further reduce costs by optimizing our product portfolio, with a primary focus on rationalizing underperforming distributed brands, as well as right-sizing our manufacturing and distribution footprint. We expect this plan will result in excess of $3 million in annual cost savings plus additional working capital improvements. We are planning incremental marketing investments in the second half of 2025 to further invigorate the performance of our higher-margin, proprietary brands. We believe these actions collectively position us well to accomplish our strategic priorities to drive high quality revenue streams, improve our profitability, and strengthen our financial position.”
Second Quarter 2025 Financial Results
Net sales decreased 28.4% to $39.2 million compared to $54.8 million in the prior year period. This was due to a 27.9% decline in volume/mix of products sold primarily related to industry oversupply and a 0.4% decrease in price. Though the overall industry continues to be pressured, volume/mix declines were most significant in our durable products versus our consumable products within the quarter.
Gross Profit decreased to $2.8 million, or 7.1% of net sales, compared to $10.9 million, or 19.8% of net sales, in the prior year period. Gross profit was impacted by non-cash restructuring costs of $3.3 million in the second quarter of 2025. Adjusted Gross Profit decreased to $7.5 million, or 19.2% of net sales, compared to $13.3 million, or 24.4% of net sales, in the prior year period. The decreases in Gross Profit, Adjusted Gross Profit, Gross Profit Margin, and Adjusted Gross Profit Margin were primarily due to lower net sales and a decline in proprietary brand sales mix. The decline in proprietary brand mix was primarily due to the performance in several durable lighting and equipment products.
Selling, general and administrative (“SG&A”) expense improved to $16.1 million, compared to $18.7 million in the prior year period, and Adjusted SG&A expense improved to $9.8 million compared to $11.6 million in the prior year period. The reductions were mainly due to decreases in compensation costs from lower headcount and performance bonus, insurance expenses, and facility costs, primarily driven by the Company’s restructuring actions and related cost-saving initiatives.
Net loss was $16.9 million, or $(3.63) per diluted share, compared to net loss of $23.5 million, or $(5.10) per diluted share in the prior year period. Net loss was negatively impacted by lower sales and gross profit margin, partially offset by current year SG&A expense reductions. In addition, the prior year period was impacted by a loss recorded on the IGE Asset Sale.
Adjusted EBITDA decreased to $(2.3) million, compared to $1.7 million in the prior year period. The reduction was related to lower net sales and lower Adjusted Gross Profit Margin, partially offset by Adjusted SG&A expense reductions.
Restructuring Plan
The Company initiated a restructuring plan in the second quarter of 2025 to narrow its product portfolio and operational footprint, reduce costs and improve efficiency. The Company incurred estimated restructuring costs of $3.3 million during the second quarter of 2025 which were primarily associated with non-cash inventory write-downs. The restructuring plan is expected to result in estimated annual cost savings in excess of $3 million plus incremental working capital reductions.
Balance Sheet, Liquidity, and Cash Flow
As of June 30, 2025, the Company had $11.0 million in cash and approximately $9 million of available borrowing capacity on its Revolving Credit Facility. The Company made a $4.5 million prepayment on its Term Loan and ended the second quarter with $114.5 million in principal balance outstanding, $8.1 million in finance leases, and $0.1 million in other debt outstanding. During 2025 and 2024, the Company maintained a zero balance on its Revolving Credit Facility. As of June 30, 2025, the Company was in compliance with debt covenants under its Revolving Credit Facility and Term Loan. As previously disclosed, on May 9, 2025, the Company entered into a seventh amendment to its Revolving Credit Facility to extend the maturity date to June 30, 2027 and reduce the maximum commitment amount to $22 million.
Cash from operating activities was $1.7 million and the Company invested $0.3 million in capital expenditures, yielding Free Cash Flow of $1.4 million during the three months ended June 30, 2025. Working capital benefits led to a sequential improvement in Free Cash Flow in the second quarter of 2025.
Reaffirms Full Year 2025 Expectations
The Company is reaffirming the following expectations for fiscal year 2025:
- Improved year-over-year Adjusted Gross Profit Margin resulting primarily from an expectation of (i) a higher full year proprietary brand sales mix, (ii) continued benefit from cost savings associated with prior year restructuring and related productivity initiatives, (iii) incremental cost savings expected in the second half of 2025 related to the new restructuring and related cost savings initiatives, and (iv) minimal non-restructuring inventory reserves or related charges.
- Reduced year-over-year Adjusted SG&A expense resulting from a full year benefit of reductions completed in 2024 as well as incremental expense savings expected in the second half of 2025 related to the new restructuring and cost savings initiatives, including compensation savings, and further reductions in professional and outside service fees, facilities and insurance expense.
- Reduction in inventory and positive free cash flow for the final nine months of 2025.
- High tariffs on imported products from China or other countries, or new tariffs from other countries, could impact the cost of certain products and may negatively impact the Company’s 2025 financial performance.
- Capital expenditures of less than $2 million for full year 2025.
Hydrofarm remains committed to its strategic priorities: drive diverse high-quality revenue streams, improve profit margins and strengthen financial position.
About Hydrofarm Holdings Group Inc.
Hydrofarm is a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, including grow lights, climate control solutions, grow media and nutrients, as well as a broad portfolio of innovative proprietary branded products. For over 40 years, Hydrofarm has helped growers make growing easier and more productive. The Company’s mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency and speed in their grow projects.
