Hydrofarm Holdings Group (NASDAQ:HYFM) posted its Q3 2024 results, showing mixed performance with a drop in net sales but improved gross margins.

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Key Financial Highlights

• Net Sales: Down 18.8% year-over-year, totaling $44.0 million, primarily due to lower demand in the cannabis sector.
• Gross Profit Margin: Increased significantly to 19.4% (from 6.1%), attributed to cost-saving measures and a higher mix of proprietary brands.
• Net Loss: Improved to $13.1 million, compared to $19.9 million last year, driven by reduced SG&A expenses.
• Adjusted EBITDA: Stayed positive but decreased to below $0.1 million, influenced by declining net sales but offset by lower operating costs.

Read Also: Gardening Giant Scotts Miracle-Gro Reports 46% YoY Drop In Q4 Net Sales For Its Cannabis-Focused Subsidiary

Cash Flow And Liquidity

The company ended Q3 with $24.4 million in cash and $17 million in available credit. Free Cash Flow for the quarter was negative, at $(5.3) million, largely due to adjustments in working capital.

Outlook

Hydrofarm reaffirmed its 2024 guidance, targeting positive Adjusted EBITDA and Free Cash Flow for the year, despite a challenging market environment. CEO Bill Toler highlighted continued focus on proprietary brands and operational efficiency as key drivers of margin growth.

These results underscore Hydrofarm's cautious but optimistic approach, balancing cost management with strategic growth initiatives amidst industry pressures.

Price Action

Hydrofarm traded down 4.66% at $0.56 when the market opened on Thursday.