Key Takeaways:
- Net sales fell to $39.2 million, down 28% from the prior year
- Gross profit margin declined to 7.1%, with adjusted gross profit margin at 19.2%
- Net loss narrowed to $16.9 million from $23.5 million year-over-year
- Restructuring plan expected to save over $3 million annually and improve working capital
- Company reaffirms full-year 2025 expectations, including positive free cash flow for final nine months
Hydrofarm’s Financial Performance Overview
Hydrofarm Holdings Group, Inc. reported second quarter 2025 net sales of $39.2 million, down from $54.8 million in the prior year period, primarily due to reduced product volume linked to industry oversupply. Gross profit was $2.8 million, representing 7.1% of net sales, while adjusted gross profit stood at $7.5 million, or 19.2% of net sales.
Selling, general and administrative expenses fell 13.5% year-over-year to $16.1 million, reflecting ongoing cost-control measures. Net loss narrowed to $16.9 million, compared to $23.5 million a year earlier, while adjusted EBITDA was $(2.3) million versus $1.7 million last year.
Restructuring to Improve Efficiency
The company initiated a restructuring plan during the quarter aimed at narrowing its product portfolio, rationalizing underperforming distributed brands, and optimizing manufacturing and distribution operations. This initiative is projected to save over $3 million annually and yield additional working capital improvements.
“In the second quarter we delivered nearly 16% 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,” said CEO John Lindeman. “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.”
He added, “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.”
Hydrofarm’s Liquidity and Cash Flow
As of June 30, 2025, Hydrofarm held $11 million in cash and maintained $9 million in available borrowing capacity on its revolving credit facility. The company made a $4.5 million prepayment on its term loan, ending the quarter with $114.5 million in outstanding principal debt.
Operating activities generated $1.7 million in cash during the quarter, with $0.3 million in capital expenditures, resulting in $1.4 million in free cash flow.
Hydrofarm’s 2025 Outlook
Hydrofarm reaffirmed its full-year guidance, anticipating improved adjusted gross profit margin, reduced adjusted SG&A expenses, inventory reduction, and positive free cash flow for the remainder of the year.
“We are planning incremental marketing investments in the second half of 2025 to further invigorate the performance of our higher-margin, proprietary brands,” Lindeman said. “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.”
Read the company’s entire financial results here.
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