Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM) announced financial results for its first quarter ended March 31, 2022, with net sales remaining flat at $111.4 million, which missed the Yahoo Finance average analyst estimates for revenues of $129 million. The net loss was ($23.3) million, or a loss of ($0.52) per diluted share, compared to a net income of $4.9 million, or $0.13 per diluted share. This also missed the estimates for earnings of ($0.06). Hydrofarm gave a 2022 forecast for net sales of approximately $480 million to $520 million.
Bill Toler, Chairman and Chief Executive Officer of Hydrofarm, said, “Over the past year, our team has strengthened our business through a number of initiatives, including our five acquisitions, the expansion of our distribution and manufacturing footprint, and the creation of new leadership roles. While we remain optimistic about the health of our business and our long-term potential, our ability to reap the benefits of our actions has been impacted by the agricultural oversupply that has hampered cannabis growing activity across the US and Canada. This dynamic was apparent in our first-quarter results.”
Hydrofarm attributed the lackluster growth to an approximate 2.1% decrease in the volume of products sold, offset by an approximate 2.2% increase in price and mix of products sold, and an approximate 0.1% decline from unfavorable foreign exchange rates. The company though believes the market will improve by the end of the year. Hydrofarm expects a sequential improvement from negative organic growth in the first quarter to positive organic growth in the fourth. Capital expenditures are expected to be approximately $8.0 million to $10.0 million and an estimated tax provision is between $0 and $3 million for the full year, excluding the large discrete tax benefit of $8.5 million recognized in Q1 2022.
Mr. Toler added, “We believe these industry challenges are transient, and we continue to take aggressive actions to optimize our business through pricing and cost controls that we believe will benefit our business over time. Moreover, we are seeing bright spots in our IGE business, in our commercial business, in newer legalized states, and in our peat business. With a strong product portfolio and healthy balance sheet, we remain well positioned to capture the tremendous long-term growth opportunities in the CEA industry.”