Hydrofarm Holdings Q2 Revenue Jumps 46.7% YoY To $133.8M, Raises Full Year Guidance Based On Important Acquisitions

Hydroponics equipment manufacturer Hydrofarm Holdings Group, Inc. HYFM, announced its second-quarter financial results Thursday with net sales of $133.8 million, missing Seeking Alpha's estimates by $2.2 million. The revenue improved 46.7% year-over-year. 

Second Quarter 2021 Highlights vs. Prior Year Period:

• Gross profit increased 65.5% to $29.6 million, or 22.1% of net sales, compared to $17.9 million, or 19.6% of net sales.
• Net income attributable to common stockholders was $2.3 million or $0.05 per diluted share compared to $1.9 million or $0.08 per diluted share.
• Pro forma adjusted net income was $12.5 million or $0.30 per pro forma diluted share compared to $4.0 million or $0.12 per pro forma diluted share.
• Adjusted EBITDA increased 127.5% to $16.2 million compared to $7.1 million.
• Completed two acquisitions during the quarter: HEAVY 16 and House & Garden.

Recent Developments

• Completed two acquisitions subsequent to quarter-end: Aurora Innovations and Greenstar Plant Products.
• Completed Investor Warrant redemption, raising approximately $56.8 million in gross proceeds.

Revised Full Year 2021 Outlook vs. Prior Year:

• Significant increase in full-year outlook with contribution from the four completed acquisitions.
• Net sales growth of 45% to 50%; Adjusted EBITDA⁽²⁾ of $55.0 million to $62.0 million.
• Pro Forma⁽³⁾ net sales $565 million and $590 million; Adjusted EBITDA⁽²⁾⁽³⁾ of $80 million to $90 million.

 “We maintained momentum during the second quarter, as demonstrated by 47% increase in our top-line and significant improvement in our Adjusted EBITDA, which more than doubled on a dollar basis and increased considerably on margin basis,” Bill Toler, chairman and CEO of Hydrofarm, stated. “Our team also successfully executed against our acquisition strategy, completing four acquisitions during and subsequent to the second quarter, bringing four fantastic businesses in the nutrient and grow media categories under the Hydrofarm umbrella. These acquisitions not only help expand our proprietary consumable offerings and manufacturing prowess but also demonstrate our position as the acquirer of choice in this highly fragmented industry.”

Balance Sheet and Liquidity

As of June 30, 2021, the Company had cash of approximately $195.4 million and an aggregate principal amount of debt outstanding of $1.7 million, as well as $50.0 million of available borrowing capacity under its revolving credit facility.

Full Year 2021 Outlook

In light of the Company’s recent performance and acquisition activities, the Company is providing the following updated outlook for the full fiscal year 2021:

• Net sales growth between 45% and 50%.
• Adjusted EBITDA⁽⁴⁾ of $55.0 million to $62.0 million, representing margin expansion to approximately 11.0% to 12.1% for the full fiscal year.

Since the Company has recently completed four acquisitions (with only a partial year contribution from each acquisition embedded within the outlook above), the Company estimates that on a pro forma full-year basis as if all four acquisitions had occurred on January 1, 2021, the Company would expect to generate between approximately $565 and $590 million of net sales and $80 and $90 million of Adjusted EBITDA⁽⁴⁾.

Price Action

Hydrofarm’s shares were trading 4.01% higher at $49.00 per share during Friday's pre-market session.

Photo: Courtesy of Drew Taylor on Unsplash