Navigating Industry Challenges with Strategic Restructuring: Hydrofarm Holdings Group Inc (HYFM) Q2 2025 Earnings Call Highlights

Hydrofarm Holdings Group Inc (HYFM) reported a 28.4% YoY decline in net sales due to a decline in volume mix and industry oversupply. However, the company achieved its 12th consecutive quarter of year-over-year adjusted SG&A savings, with a nearly 16% reduction in expenses. HYFM initiated a new restructuring plan to focus on higher-margin brands and optimize its distribution and manufacturing network, expected to drive higher-quality revenue streams.

Title: Hydrofarm Holdings Group Reports Second Quarter 2025 Results

Hydrofarm Holdings Group Inc. (HYFM) reported a 28.4% year-over-year (YoY) decline in net sales during the second quarter of 2025, primarily due to a 27.9% decline in volume/mix of products sold, influenced by industry oversupply. Despite this, the company achieved its 12th consecutive quarter of year-over-year adjusted SG&A savings, with a nearly 16% reduction in expenses. HYFM initiated a new restructuring plan to focus on higher-margin brands and optimize its distribution and manufacturing network, aiming to drive higher-quality revenue streams [1].

The company's net sales decreased to $39.2 million compared to $54.8 million in the prior year period. 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 and adjusted gross profit were primarily due to lower net sales and a decline in proprietary brand sales mix [1].

HYFM's 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 [1].

The company's 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. 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 [1].

HYFM 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, 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 [1].

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. The company maintained a zero balance on its Revolving Credit Facility during 2025 and 2024. 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 [1].

HYFM reaffirmed its expectations for fiscal year 2025, including improved year-over-year adjusted gross profit margin, reduced year-over-year adjusted SG&A expense, reduction in inventory, and positive free cash flow for the final nine months of 2025. The company expects to achieve these improvements through higher full-year proprietary brand sales mix, continued benefits from prior year restructuring initiatives, and incremental cost savings expected in the second half of 2025 related to the new restructuring plan [1].

HYFM remains committed to its strategic priorities: drive diverse high-quality revenue streams, improve profit margins, and strengthen its financial position.

References:
[1] https://investors.hydrofarm.com/news-releases/news-release-details/hydrofarm-holdings-group-announces-second-quarter-2025-results