Hydrofarm Group (HYFM) investor relations material

Executive summary

• Net sales for Q1 2026 were $28.5 million, down 29.6% year-over-year due to industry oversupply and reduced demand, especially in cannabis-related markets.

• Gross profit margin fell to 6.4% from 17.0% year-over-year, impacted by lower sales, production volumes, and restructuring charges of $1.7 million.

• Net loss was $14.6 million ($3.07 per share), similar to the prior year, with adjusted EBITDA at $(3.9) million, down from $(2.4) million.

• Significant cost reductions achieved, with SG&A expense down 40.8% and Adjusted SG&A down 23.1% year-over-year.

• The company faces substantial doubt about its ability to continue as a going concern due to recurring losses, negative cash flows, and significant near-term debt obligations.

Financial highlights

• Net sales decreased by $12.0 million year-over-year, primarily from a 27.8% reduction in volume/mix and a 2.7% price decrease.

• Gross profit decreased to $1.8 million, or 6.4% of net sales, compared to $6.9 million, or 17.0%, in the prior year.

• Cash and equivalents at quarter-end were $5.3 million, with a working capital deficit of $98.0 million.

• Interest expense rose to $5.9 million, driven by accelerated amortization of deferred financing costs after a loan default.

• Free Cash Flow improved to $(0.8) million from $(12.0) million year-over-year.

Outlook and guidance

• Management is pursuing cost reductions, facility consolidations, and a focus on proprietary brands to improve liquidity.

• Strategic alternatives, including asset sales and new financing, are being explored, but their success is uncertain.

• Additional restructuring charges up to $4 million are anticipated, with expected annual cost savings of over $5 million.

• Strategic focus remains on driving high-quality revenue, improving margins, and strengthening the financial position.