Hydrofarm Holdings Group, Inc.

Hydrofarm reported second-quarter net sales of $39.2 million, down 28.4% year over year. Gross profit was $2.8 million, or 7.1% of net sales, versus $10.9 million, or 19.8%, a year ago; adjusted gross profit was $7.5 million, or 19.2%, versus $13.3 million, or 24.4% last year. Adjusted EBITDA was a loss of $2.3 million. Adjusted SG&A was $9.8 million, down 16% from $11.6 million. Free cash flow was $1.4 million, with $1.7 million of operating cash flow and $0.3 million of capex. The company said gross profit was hit by $3.3 million of restructuring charges tied to noncash inventory write-downs. For guidance, management expects the restructuring to deliver more than $3 million of annual cost savings, with about 1/3 of the benefit showing in the second half of 2025. It also expects improved proprietary mix and adjusted gross margin for full-year 2025 and said it remains on pace to generate positive free cash flow for the last 9 months of 2025.

CEO John Lindeman emphasized cost control, portfolio simplification, and cash generation as the main levers to improve the business. He said Q2 included the company’s 12th consecutive quarter of year-over-year adjusted SG&A savings and that the new restructuring plan should shift the company toward higher-margin brands, lower complexity, and better working capital use. His tone was cautious but constructive: he acknowledged weak demand and tariff uncertainty, while pointing to stronger performance in consumables, international sales, and new products like SunBlaster’s Nano and Halo lights.

CFO Kevin O’Brien focused on the financial hit from weak sales and restructuring, but highlighted continued expense discipline and liquidity. He said net sales were $39.2 million, adjusted gross profit was $7.5 million, adjusted SG&A was $9.8 million, and adjusted EBITDA was a loss of $2.3 million. On the balance sheet, he noted $11 million of cash, $114.5 million of term loan principal, $122.6 million of total debt, $111.6 million of net debt, and $20 million of total liquidity, with no borrowings on the revolver. He also said the company made a $4.5 million prepayment on the term loan and expects the restructuring to create more than $3 million in annual savings plus working-capital benefits.

Analysts focused on tariff exposure, the rationale for trimming third-party brands, diversification away from cannabis, and the possibility of cannabis rescheduling. Management said tariff impacts have been manageable so far, estimating about $300,000 of incremental costs year-to-date, and said it is responding through supplier sharing, selective pass-through pricing, and alternative sourcing. On the portfolio overhaul, management said the cuts were aimed at underperforming, redundant, low-margin SKUs and distributed brands, not at eliminating breadth, and that the goal is to improve margins and simplify operations. On rescheduling, management said recent reports were encouraging but that it would wait for actual policy action before assuming a benefit.