Hydrofarm Posts Q1 2025 Results Amid Ongoing Industry Challenges

Key Takeaways:

• Hydrofarm reported Q1 2025 net sales of $40.5 million, reflecting a 25.2% year-over-year decline, primarily due to oversupply in the cannabis industry and reduced product volume.
• Adjusted EBITDA declined to $(2.4) million, down from $0.3 million in Q1 2024, as lower gross margins offset ongoing reductions in operating expenses.
• Proprietary branded product sales rose to 55% of total revenue, up from 52% in the previous quarter, contributing to sequential improvements in adjusted gross margin.
• Despite a wider net loss of $14.4 million, Hydrofarm continued to lower SG&A costs through restructuring efforts and staffing reductions, marking the 11th consecutive quarter of annualized cost savings.
• The company withdrew full-year 2025 guidance due to persistent cannabis sector headwinds and uncertainty over global trade and tariff developments but maintained a focus on cash flow improvements and operational efficiency.

Hydrofarm Financial Overview: Q1 2025 vs. Q1 2024

Hydrofarm Sees Sequential Progress, Despite Year-Over-Year Declines

Hydrofarm (Profile) experienced a 25.2% decline in net sales for the first quarter of 2025, totaling $40.5 million, compared to $54.2 million in the same period last year. The decrease was driven largely by an ongoing supply imbalance in the cannabis market, which contributed to a 22.6% drop in volume and a 1.8% decrease in pricing.

Despite the decline, Hydrofarm noted sequential improvements. Proprietary branded products made up 55% of total sales, compared to 52% in Q4 2024, helping to stabilize margins. Gross profit margin declined to 17.0%, and adjusted gross profit margin decreased to 21.0%.

CEO John Lindeman emphasized the company’s operational focus: “We achieved sequential improvements by reinvigorating our focus on higher-margin proprietary brands and executing our strategic priorities. We believe these efforts position us to build on progress through the year.”

Hydrofarm Focuses on Cost Control and Financial Flexibility

Operating expenses continued to decline in the quarter, with SG&A down 9.0% and adjusted SG&A down 11.0%. These reductions stemmed from ongoing restructuring efforts, lower compensation costs, and reduced facility-related expenses.

Net loss widened to $14.4 million, up from $12.6 million in the prior-year period, due to reduced sales and gross margins. Adjusted EBITDA turned negative at $(2.4) million, down from $0.3 million.

Hydrofarm ended the quarter with $13.7 million in cash and $17.0 million in available borrowing capacity. On May 9, the company extended the maturity of its Revolving Credit Facility to June 30, 2027, and reduced the maximum commitment to $22 million.

Hydrofarm Withdraws Outlook Amid Tariff and Market Pressures

Citing persistent uncertainty related to global tariff developments and continued cannabis market weakness, Hydrofarm withdrew its full-year 2025 financial guidance. However, the company outlined the following expectations and strategic focus areas:

• Higher adjusted gross profit margins are anticipated due to a greater mix of proprietary products and cost efficiencies from 2024 and 2025 restructuring initiatives.
• Adjusted SG&A expenses are expected to continue declining due to reduced service fees, insurance, and facility costs.
• Inventory reduction and positive free cash flow are targeted for the remainder of 2025.
• Capital expenditures for the year are projected to remain under $2 million.

Outlook

Hydrofarm is working to navigate ongoing pressures in the cannabis sector while responding to broader trade policy changes that may impact equipment and input costs. The company remains focused on margin expansion, cash flow improvement, and supply chain optimization.

Read the company’s entire financial results here.