Hydrofarm Q2 net sales down 35% to $63.1M; posts positive Adjusted EBITDA $2.5M, updates FY outlook

The Company is updating its full year 2023 outlook: • Net sales of approximately $230 million to $240 million. • Adjusted EBITDA (1) that is modestly positive for the full year, consistent with previous expectations. • Free Cash Flow (1) that is positive for the full year, consistent with previous expectations.

Net sales in the second quarter of 2023 decreased to $63.1 million compared to $97.5 million in the second quarter of 2022, driven by a 32.5% decline in volume of products sold, a 2.3% decrease in price/mix of products sold, and a 0.5% decline from unfavorable foreign exchange rates. The decrease in volume of products sold was primarily related to oversupply in the cannabis industry. The reduction in price was mainly due to lower prices on specific previously reserved lighting products, as well as a higher mix of generally lower-priced consumables relative to higher-priced durable products. Gross profit increased to $14.5 million during the second quarter of 2023, compared to $7.3 million in the prior year period. The increase was primarily due to a $9.9 million reduction in inventory provisions compared to the prior year period. Gross profit margin percentage increased to 23.0% from 7.5% in the prior year. Gross profit and gross profit margin percentage also improved due to selling a