Hydrofarm Holdings Group, Inc. reported its financial results for the third quarter and nine months ended September 30, 2024, revealing significant changes in revenue and profitability compared to the previous fiscal period. The company recorded net sales of $44.0 million for the third quarter, a decrease of $10.2 million (18.8%) from $54.2 million in Q3 2023. For the nine months, net sales totaled $153.0 million, down $26.4 million (14.7%) from $179.4 million in the same period last year. The decline in sales was attributed to a 13.7% decrease in volume/mix and a 4.9% decrease in price, primarily due to oversupply in the cannabis industry.

Despite the drop in sales, gross profit for the third quarter increased to $8.5 million, up $5.2 million (157.4%) from $3.3 million in Q3 2023, resulting in a gross profit margin of 19.4%. For the nine months, gross profit rose to $30.3 million, an increase of $1.1 million (3.9%) compared to the prior year. The improvement in gross profit was partly due to a reduction in restructuring charges.

Operating expenses also saw a decline, with selling, general, and administrative (SG&A) expenses for the third quarter at $17.6 million, down $2.0 million (10.2%) from the previous year. For the nine months, SG&A expenses decreased by $11.6 million (17.2%) to $55.8 million. The company reported a loss from operations of $(9.0) million for Q3 2024, a decrease in loss of $7.2 million (44.3%) compared to the same quarter in 2023. The net loss for the third quarter was $(13.1) million, down $6.7 million (33.9%) from $(19.9) million in Q3 2023.

Hydrofarm's total current assets decreased to $103.4 million as of September 30, 2024, from $128.1 million at the end of 2023, with cash and cash equivalents falling to $24.4 million from $30.3 million. Total liabilities also decreased to $202.9 million from $217.0 million, while total stockholders’ equity declined to $243.0 million from $290.6 million.

Strategically, the company has been implementing a restructuring plan initiated in 2022, which has included consolidating manufacturing operations and reducing costs. The second phase of this plan began in Q3 2023, focusing on U.S. facility consolidations, with total restructuring charges for the nine months ended September 30, 2024, amounting to $1.7 million.

Additionally, Hydrofarm completed an asset sale on May 31, 2024, generating approximately $8.7 million in proceeds, which included inventories and property, plant, and equipment. The company recorded a loss on asset disposition of $11.5 million for the nine months ended September 30, 2024.

As of September 30, 2024, the company had a Term Loan balance of $119.6 million, down from $122.5 million at the end of 2023, and no borrowings under its Revolving Credit Facility. The company is currently working to regain compliance with Nasdaq's minimum bid price requirement, having received an extension until March 2025.