Hydrofarm Q2 net sales down 28.4% to $39.2mln, gross profit margin falls to 7.1%.

• Hydrofarm's Q2 net sales down 28.7% to $39.2mln • Gross profit margin decreased to 7.1% • Adjusted gross profit margin down to 19.2% • Net loss decreased to $16.9mln • Adjusted EBITDA at $(2.3)mln • Cash from operating activities and free cash flow at $1.7mln and $1.4mln, respectively.

Hydrofarm Holdings (NASDAQ: HYFM), a leading manufacturer of hydroponics equipment, released its second-quarter 2025 financial results, revealing significant declines in net sales and a narrowing of losses. The company reported a 28.4% decrease in net sales to $39.2 million compared to $54.8 million in the prior year, driven by a 27.9% drop in volume/mix of products sold and a 0.4% decrease in price [1].

The gross profit margin decreased to 7.1% from 19.8%, primarily due to non-cash restructuring costs of $3.3 million. Despite this, the adjusted gross profit margin deteriorated to 19.2% from 24.4%, indicating a decline in operational performance [1].

The net loss improved to $16.9 million from $23.5 million, but this comparison is somewhat misleading as the prior year included a loss on the IGE Asset Sale. More concerning is the shift from positive adjusted EBITDA of $1.7 million last year to negative $2.3 million this quarter, indicating deteriorating operational performance despite aggressive cost-cutting [1].

On the positive side, Hydrofarm continues to show discipline in expense management, reducing SG&A by 13.5% and adjusted SG&A by 15.7% year-over-year—marking their 12th consecutive quarter of expense reductions. The company also generated positive free cash flow of $1.4 million and made a $4.5 million prepayment on its term loan, maintaining a healthy liquidity position with $11 million in cash and $9 million in available credit [1].

Management has launched a new restructuring initiative targeting over $3 million in annual savings by optimizing the product portfolio (particularly eliminating underperforming distributed brands) and right-sizing manufacturing and distribution operations. The company plans to increase marketing investments in the second half to boost higher-margin proprietary brands [1].

The industry headwinds mentioned by management appear to be hitting durable products harder than consumables, suggesting growers are maintaining existing operations but delaying new equipment purchases. Hydrofarm's reaffirmation of its full-year guidance shows confidence in their restructuring plans, but the path to sustainable profitability remains challenging amid the ongoing industry downturn [1].

References:
[1] https://www.stocktitan.net/news/HYFM/hydrofarm-holdings-group-announces-second-quarter-2025-dval21cu15z9.html